penalties. we would have to look at things to make insurance more affordable. folks are putting their own money out. we have to cut into that somehow. that will be the next series of challenges. it is a good question. it is a good question. we see the policy, but there are levels of priority in public policy, and our basic organizing principles of this country center around the u.s. constitution, what we agreed to as federal responsibility, what we agree to as a state responsibility, and individual responsibility. this is our basic organizing document. in virginia, we have been fighting about these things

since before most of the other state existed. we had george washington and alexander hamilton and thomas jefferson and james madison. we have done this for a couple centuries. collet blood sport or whatever, we believe there are limits to what the federal government should be able to do. that takes priority over the policy decisions that can be made. if you talk to the attorney general, which we have, he will say the federal government does not have the authority to do this. the state could. he will tell you i think it is a bad idea, but he would say the state has the ability to do these things and the federal government does not, nor should we allow them to have it. that is a higher-order conversation in terms of the way we organize ourselves. ron and i disagree about this.

that is the fundamental thing, and what we do at the state level is different. the argument made for the first time the federal government will coerce an individual to engage in commerce so that commerce can be regulated is what is i think arguable. it is a legitimate question that needs to be worked through, and hopefully the supreme court will work through this and by the 25th or 28 tell us what the constitution says so we can continue to do what we need to do. >> do you want a rejoinder or not? >> there will be other chances, but let's move on to some of the other questions. >> one of the questions is transitioning the high-risk pool

of people. it is confusing. the federal high-risk pool is created by the federal law. there are people in each pool that go out of existence next year. how do you get them -- could put them in a cabin -- how do you transition these people to what the next type of coverage is? what happens to the ones that are called the legacy once, the ones that states created? >> i have gotten emails from people from people in the poll, saying they have a surgery in july, should i moved it off? i called everybody and talk to them about it.

i tell them i am not sure what is going to happen. if this is an abstract question, there is the abstraction of the individual mandate. i am not a lawyer. -- setting would be that aside, i care about emails i get from people who are worried about their potentially life-saving surgery and what happens. this decision could be challenging and directly impacting 50,000 people. these are people who cannot buy insurance in the private markets. there is an awful lot of states and damage that could be done to people if there is an adverse decision. i think the issue of transition to exchanges is an interesting one, at about 1000 people in

the high-risk federally funded school right now -- and that is not an overwhelming number. we have 20,000 in maryland, and that is a bigger number. we consider that part of the three r's, the way the exchanges have to mitigate risk, re insurance other mechanisms. we're meeting with a high-risk pool with a health economist on the exchange board where we have a few different options, and that will be how we will handle that, with the goal of how risky is mitigated, which is critical to the question. >> there are a limited number of tools available, and as they come into the exchange, and

there is guaranteed issue, then we have to do the sort of adjustment, risk adjustments, at the level of individual carriers. >> this is an expensive population. how do you want them handled? >> the federal rules leave that up to the states, and it goes back to the state and local markets are in the best position to decide how to coordinate with the polls in their states. states will handle this differently. in terms of transition, it is important to go back to the affordability point, that if you have very high-risk populations jumping in to the exchange, particularly in the individual market, that could drive up premiums. the mechanisms could help their in terms of risk adjustment, and

it could be significant in certain states. it is important state do their homework, and they are. they're trying to figure out how to transition to this important population. >> the polls that the states had created with their own funds in 1995 until 9 -- what happened? what are you hearing about those? will they be segmented off and be kept separate? [unintelligible] what happens to those pre- existing populations of people with pre-existing illness? >> question. i will defer, but this has to be important questions at what states look at in terms of what the impact will be. >> our experience, and for the sake of time, we are not exactly

the same, but we had about 10,000 in the high-risk pool -- at the state level, and that was maintained. we decided to defer into the federal pool, because when we added up the funding, we did not think we wanted to put taxpayers' on the hook knowing we would run out of money before the time period was up. that right now is still a question for us. >> one quick perspective, these polls are in essential given our current system. otherwise folks will have no other recourse. this is not a way for us to be providing health coverage to people. when you have pools, you wind up having rules just for those folks. do you have to be uninsured for

six months prior? how significant for your -- how significant should direct health problem be? it causes issues because it makes the pole sitter and older, and we have to have balance, and we have to make sure we do things to make sure there is balance. i hope we do not need risk pools in the future, because we should not be segregated that group and creating rules, which inevitably happens, because this group is expensive. any state or fence that implement this pool will be guarded, and these rules will be created. >> the issue is in our minds, the ideal thing that what happened is an individual who comes into insurance which create a relationship with their pay year that would last a lifetime. right now what happens, they are

employed, it changes on the average of 11 months, you are popping in and out of insurance companies, that if you get sick or are disabled or if you get to be 65, you become the government's responsibility. where is the emphasis and the interest in the markets to ensure health as opposed to focusing on the health care side of things? you always have that downstream risk you can put into another pollol och. -- pool. that is a fundamental relationship changed with your insurance that we did not foresee, which i the needs to happen. >> we have time for one more

question. >> we are down to two minutes. june 29, we have had a ruling. let's assume that either all or part or a big chunk of this lot is still on the books. we have until a year and a half to resolve it. duke the states get to work the next day, or does it become i will think about it next november? what are you hearing? >> i am not want to speculate. we are planning for the various scenarios that the states are planning. >> d.c. we go to another waiting game? >> it depends on the ruling. there is a whole range of possibilities. >> it will be different from one state to the other. bobby jindal is thinking about

two dozen 16. 2016. will he be changing before the election? probably not. nobody has argued the law is unconstitutional. it is that the medicaid expansion and individual responsibility issue. if the supreme court says that we can move forward with most of the statute, it does not mean every single state -- those governors who want to make statements because of their future in the republican party, their aspirations, they may not move. >> it is going to be repealed -- if i'm a governor, do i want to go through -- >> we have a process in place

and we are developing the level one implementation grant request funding. a decision will be made above my level about whether it goes out, but our general assembly is expecting we will stay prepared. at some point we will have the general assembly way in to create this, and that is the challenges for us. if he asked me today if the house of delegates would approve an exchange talk that is an iffy proposition. we have the challenge of proceeding, and i am not sure it makes a lot of difference for us in terms of what may be in the exchange and what may not be, and will help us with our planning, and we will be moving forward, but the assembly will have their say. what happens with congress and the elections and a special sessions, everyone is wildly optimistic that things will be better for their side, but what

congress does is a huge issue here that we cannot control. >> we are in it for health and the economy. i promised my mom and her closest friends that i will update them on the supreme court ruling and how it affects their jobs. my shameless plug. maryland sees the value -- our intent is to make this work any way it possibly can. >> thank you so much during us today an. [captions copyright national cable satellite corp. 2012] [captioning performed by national captioning institute]

>> coming up, live coverage of the ford journalism awards. chris matthews is the featured speaker and it starts in about 45 minutes. later we will bring you a discussion on european debt crisis. speakers will include the ceo of to which a bank. looking at congress this week, the senate gavels in at 2:00 p.m. with the work on a bill that will prohibit gender-based pay discrimination. the house gavels in tomorrow for

legislative work and energy and water spending is on their agenda. you can watch the house live on c-span. the senate on c-span2. >> it has reached settlements about some of the promises that they made to consumers. i think self-regulation is a tool that can be much more responsive to changes in the marketplace in a quicker way than regulation. >> tonight and look at the ftc's enforcement role. the key indicators at 8:00 p.m. eastern on c-span2. -- "the communicators" at 8:00

p.m. eastern on c-span2. >> the author toward sites in kansas to find the origins of barack obama's mother's family. the book comes out on june 19, but book tv will give you an early look. join us sunday, june 17, and later at 7:30 that same night, your phone calls for the author on "book tv."

host: for those who are not familiar, what is the goal? guest: is a product of the fact checking web site, at wheat research claims that are made by candidates, political groups, parties and rate their accuracy on a 8 meter from tree to fall. then we have our lowest rating for the most ridiculous. we have a network of news organizations around the country that work with us. we have 11 state sites. our newest launched over the weekend, and we have been in key states like florida and

wisconsin. we checked the claims and help people make sense of what is true and what is not. host: the 2012 is officially under way. we are here during the primary to discuss some trends. what do you see now that the election is under way? guest: the political groups -- i always have to say that now because we're not just talking about political parties, but also the pacs, superpacs, the 501-c4 groups. the're all laying down foundation for their general election campaigns. they are using many of the same talking points. pacs and superpacs that support mitt romney are laying down the same sort of points that romney

is making. for instance, president obama has broken his promises on various things, and various claims about the economy about the health care law. likewise, the democrats and the liberal groups are doing the same thing, laying down the points they want to make about obama and also about romney, particularly with regard to bain capital. we used to think the general election campaign did not start until labor day. labor day is the traditional kickoff of the general election campaign. it is under way now. we have a lot to check at politifact. we're seeing new ads practicallyhost: if you have a question for bill adair, give us a call in.

questions about work that they've done or facts that you would suggest for politifact look into. we will take all of those calls. let's look at an ad that recently came out about romney's work at bain capital. [video clip] >> i was a steelworker for 30 years. we had a reputation for quality products. something that was american made. we were not rich, but i was able to put my daughter through college. >> a good paying job that you can support and raise a family on is hugely important. >> that stopped with bain capital. >> bain capital was the majority owner. they were responsible. mitt romney was deeply involved in the influence that he exercised over these companies. >> take us through your fact checking for that ad.

guest: it was tricky. it was not one single fact stated in that. we took the press release about this ad then we took a statement from it that after they bought gst, mitt romney loaded it with debt, and walk away with a healthy profit. we took that and broke it into parts. we looked at each part and determined that we did deserve the rating of mostly true. they did heavily loaded with debt. they close the kansas city plant and did make a profit. we did not rate it true because there are some outside factors. the market for steel had declined tremendously. some other outside factors make

us take it down to mostly true. another one being romney had left bain before gst steel closed, i believe. host: let's look at an ad that did not get quite as good a rating from ads. [video clip] >> same-sex couples should be able to get married. >> i indicated my view, which is i do not favor marriage between people of the same gender. i do not favor civil unions, if they are identical to marriage, other than by name. host: take us through the fact checking on that one. guest: the fact we checked is that mitt romney would deny gay

people the right to adopt children. we rated that false. we found that there just was nothing in what romney had said to support that claim -- that he had been consistently opposed to gay marriage, but also said he respected state adoption laws, including laws that allow gay couples to adopt. nothing to support that one. we rated that one false on our truth-o-meter. host: we are going to take some of your calls. we will go up to new york. richard is waiting on the republican line. good morning, richard. caller: good morning. i was wondering -- i've been looking at this website -- the real delegate count. they have romney at 627 and ron

paul at 156. a long way to tampa. is anybody investigating -- ron paul says he has more donations from the current military and veterans than all of the other candidates combined, including the president. other than that, of the shenanigans that went on in shreveport where ron paul got 62% of the delegates and then they elected a new chairman. the old chairman had his man that was on a prosthetic hip thrown to the ground and arrested. blackboxvoting.com also mentions a lot of the things that go on behind the scenes. host: do you do much work on ron paul at this point? guest: at this point, but in response to your question about the military donations, we have fact checked that.

we have given that a true. members of the military have given him more contributions than barack obama and more than twice what they send other republican candidates. we rated this in july. it earned a true. at this point, we're focused more on romney and obama. romney is the presumptive nominee. the we are really focus now on covering the general election campaign. we do check other people who speak up in american politics. sometimes we check pundits and talk-show hosts. congress. our state sites are checking state leaders. governors, candidates for governor, candidates for the u.s. senate. host: the economy is pulling a starring role in the campaign. talk about your new economic scorecard. guest: this was a different

type of politifact story that we did over the weekend. one of our writers who specializes in economics, we decided that instead of telling the story through fact checks, numbers for people. our lead story on politifact.com right now is the scorecard on the economy. basically just presents the important statistics that show the health of the economy over the past four years. we started in 2008. we had sort of a benchmark and then we looked at every january since, as well as the most recent data. it is really fascinating. one of the things that we may not have realized has gotten worse are food prices. food prices have really increased a lot. other measurements -- some are encouraging and some are not so encouraging. this is just a very neutral look at how we're doing. host: we've got this here on

the ipad. it is the yearly food prices you were just talking about, taking a look at a loaf of white bread, a half pound of ground chuck, and the changes over the years from 2008 through today. when you look at parts of the economy, were you looking mostly at the numbers that get most confused or fuzzy, or did you stick to topline numbers? host: we tried to give a good sampling of lots of things. we looked at the budget deficit and debt. we looked at mortgage rates. some things are much better. mortgage rates are down to 3.9%. 10 or 15 years ago, who could have ever imagined mortgage rates that low? other numbers have not gone so well. unemployment is still high. 8.2% most recently. peaked at 9.7 in january 2010 the way we calculate it it.

it is interesting chart. we shaded it different ways so you can see what has improved and what has not. democratic line. you are on with bill adair. go ahead, bill. caller: good morning, c-span. i recently read in a magazine that politifact and your nearest competitor had listed in general veracity of statements and almost seven out of 10 pants on fire were given to republicans as opposed to democrats? isn't that true? guest: i can honestly say i do not keep score. asking me that question is sort

the red sox? i do not know. we look at everything independently. our goal is not to sort of paint one party or the other as telling more falsehoods, but really to give you the information to draw conclusions. people have looked at our data and reached various conclusions and we are happy to have folks do that. i don't spend much time looking at that. it's more portents that we'd spend time doing the best fact checking that we can and doing individual claims. in st. petersburg. guest: it is called the tampa bay times and we are a business unit of it. these are reporters and we are

not affiliated with one side or the other. we are independent. everyday we choose two or three of the most interesting claims that have been made and then research them. caller: how long does that take. guest: a day to day and a half. some take longer depending on their complexity. it can be difficult work. somebody who has been studying why don't more newsbecause it's hard. it takes a real commitment of resources and the tampa bay times has been willing to make that commitment now for five years, which is extraordinary and speaks to the tremendous commitment to public service. likewise, we have 13 news organizations around the country that have also dedicated reporters and editors to check facts. total of 25 journalists, editors, and reporters that do politifact work full time. it's the most extensive fact politics. host: is that expanding into a

battleground states in 2012 for the election? guest: absolutely. as far as the presidential campaign, we are in very important states such as florida, ohio, wisconsin, virginia. as i mentioned earlier, we just opened in new hampshire over the weekend. so there is a state that is not always predictable in terms of how with those in the general election. we are still looking to add some more state partners this year. what it takes is a news organization that wants to do fact checking and is willing to make a commitment. host: how many are you taking per week? guest: ten to 15. we have checked more than 5000 political claims over the years. host: gary is on the line from

lancaster, pennsylvania. you are on the line with bill adair. caller: 2 that obama is not up to the challenge in the country, but the thing is every time he tries to pass something for the middle class, the gop and john boehner always have to bring up we cannot pass it if you are going to increase the taxes on the rich. the college students will have to pay double on the loan interest. the gop says we don't care, if you are going to increase the taxes on the rich, it does not matter. host: gary, is there a fact out there that concerns you mostly that you have questions about? caller: yes, it if people vote in romney, this country will be in bad shape. obama did not break any

promises. passed with the gop. host: you have been tracking the president those promises since the 2008 campaign. guest: after the election in 2008 we decided that we would create a new device, a meter that would track the campaign promises that barack obama made in the 2008 campaign. he has made more than 500 promises from very specific promises to individual constituencies. everything from children with autism to fighting western while light -- western wildfires. we pile into the database and periodically looked at them and rate them either as a promise kept, a compromise, a promise broken, stalled, and the largest category is promises

kept. promises broken, 14%. this allows you to look at his promises in different ways, if you want to see all of his promises kept, you can see that and you can see the promises that he has broken. we saw our gop pledge-ometer. politifact is all about holding elected officials accountable for their word. promises are as important as factual statements. and so, we felt that we could do a new form of journalism by researching them and rating them. for people. obama has been attacked formany

of those broken promises are because of difficulty in passing things through congress, as the caller mentioned. we lay out the facts for you. by ridding them like this, it gives them helpful guidance and an overview of what has passed and was not. -- by rating them. those facts that you checked. this ad talks about obama failing to stem the foreclosure prices. >> president obama's agenda promised so much. >> we must tell millions of homeowners facing foreclosure.a promise broken. one in five mortgages are still under water. >> if you are a family making less than $250,000 a year, you will not see your taxes go up. >> broken.

obamacare raises 18 different taxes. caller: what is your rating on that ad? guest: we looked at the foreclosure crisis claim, specifically that he broke his promise to help homeowners facing foreclosure. we rated that mostly true. did a lot of research on this. one of our riders spent about a talking to experts. we concluded when we looked at not just what obama had said but the benchmarks that he had set for himself, became a short. at one end a mostly true. there were other claims in their perry became sort of rapid fire. the one that obamacare raises 18 different taxes, we rated thatfound that to be an exaggeration, because it is not like it is 18 taxes on you as an individual. many of those taxes are in the

health insurance to redeem the notes insurance companies or the wealthy. the claim that millions could lose their health care coverage and be forced into a government pull, we rated that false. -- rated. republicans are really misstating what the congressional budget office said in a report. government pool gives a very dire account of what would happen, so we rated that falls. then there was another that obama promised to cut the deficit by half and does not even come close. we rated that true. host: crawl is waiting on the republican line in west virginia. -- carl. about: you're talking newspeople not doing any fast checking -- fact checking. nbc does it every day.

the only see things with their left eye. a person like yourself, if you're not truly independent or bipartisan, you can get on a program like this and verify things that are not true. and you can influence a lot of people. you know the first thing you company. you know for fact that mitt romney was not involved with bain capital in that plant closed. there were a lot of factors that cause that plant to close other than bain capital. guest: to answer your question, that's why we called that claim mostly true, there were some factors that were beyond what bain capital and romney were responsible for.

but overall the facts as they were contained in that sentence were accurate. i speak to the question about liberal conservative -- liberal/conservative and who voted for in the last election. this speaks to the tremendous passion recapitalized years -- passion that we have in the last few years. in years people say that you ruled against my guy, so therefore you are biased. i hope that instead they will read our work and consider it. even if you don't agree with our ruling, consider what we said. what it speaks to is you may not always agree with us, but i think we will make you smarter. host: chattanooga, tennessee, dave is next on the democratic line. good morning. caller: good morning.

thanks for c-span. the articles that you brought about gay marriage, the main focus of that article is gay marriage and romney is against gay marriage, but you chose -- thereally curious about mormon religion. is it true that the mormons used to believe that blacks could not get into heaven, that they were cursed? also that romney's grandfather was married seven times to seven wives and that his great- grandfather had 12 wives? host: do you go much into a candidate's personal lives or to use it to their statements on the campaign trail? guest: if it is a claim that's out there, we try to fact checked it. we do a lot of fact checking of change e-mails, which often pass along these kind of claims about religion and more personal things. we spent a lot of energy in the 2008 campaign. we checked some of the claims

that were made against john mccain and about this service as a prisoner of war. we take a lot of claims about obama, the claims that he was a muslim. there was one change e-mail that said the book of revelation portrayed the antichrist in a description that sounded remarkably like barack obama. it turns out the book of revelation did not say that. we do check a lot of those things. we have not made specific facts about the mormon faith. to the extent that the bubble up, and not just from the candidates, but even in things like jean e-mails, we will fact check those. host: davis calling from the independent-minded florida. caller: good morning. i hate to get off topic, but i just want -- i'm from the tampa bay area, but i would like him to check a couple.

of couple the preamble of the constitution says to secure the blessings of liberty. the definition of liberty is to do what one chooses. on this thing of marriage, that is a religious aspect, if you go back in history. the government is not supposed to be making any religious contributions to our country. so i don't think they should even issue a marriage licenses. i think that should be totally up to the church and the individual. i think they ought to issue civil unions. it does not matter if you want to marry a cow. that should be your own decision. host: asking you to be a constitutional scholar at times. guest: those questions are tough. occasionally we will get one and try to fact check it. these things are often matters of opinion.

where we can bring some value is if somebody characterized as a court opinion or a judge's -- and says a judge says this, then we will fact check it. a lot of these we have started and found this is really just a matter of debate for constitutional scholars. some very interesting discussions going on about gay marriage. we have fact check a lot of them, but it has to be really within the realm of facts for us to do so. host: marcus writes -- visit to the closed solyndra plant last week and it being in the headlines. guest: we have done three or four on this. one of them said that solyndra paid for robots that whistled

disney tunes. i think the robots were able to whistle disney songs. host: you send your fact checkers into the factories? guest: you make a good point, which is the importance of trying to your original research. we do try to your original research where possible. we don't typically have to leave the office to verify a lot of these things. we can look at government reports and other news reports. as much as possible we like to rely on the original sources, though. host: lafayette, louisiana, bob on our republican line. caller: good morning. i see all these people saying all kinds of things on c-span that are questionable. the only news source that you can get the truth is fox news. a lot of people come on here and say things that are not

true. i wonder if maybe for one we c- span could have the the fact checking meter on the show. guest: we will ask brian lamb. host: now doug is on the line. caller: i would like to speak to the dysfunctionality of the congress. they try to have good intentions, but the postal bill where they tried to fix the problem of the retirees health benefits and the result has been that it is bankrupting the post office. on the other side -- that was passed by interpublic tons in 2006 -- the dodd-frank bill has only made the problem worse. there were trying to fix the problem and they made the

problem worse. my real problem about the fact check is how many filibusters as the senate put forth since obama took office compared to the bush and administration? guest: that's a good one. that one sounds familiar. you might look on our website to see if we have fact check that. go to the search box and tiepins filibuster. i don't recall specifically that we have done it, but that is an interesting one. dodd-frank bill? guest: we have done some. our challenge is the scope of facts out there. on any given day is there are a thousand things we could check. if we were to say, take a day of c-span, you would be looking at hundreds of claims that could be checked over the course of a day. we tried to pick the ones that are most interesting, most provocative, that are being heard by the most people. the ones where you hear them and

you wonder, is that true? that is our goal, to satisfy your curiosity when you hear a political claim and wonder if it's true. host: we have about 10 minutes left with bill adair of politifact. it runs through the tampa bay time. the mystery of flight 427, crash investigation from 2000 to. -- 2002. for coverage of congress. john is waiting on the independent line. caller: yes, how are you? a quick question. in the last week or so, the obama administration had talked about the fact they are the most conservative spending presidents in years. the thing that stuck in my brain is this, how can that be true when they have added $5 trillion in deficit in four

years and the previous administration had less than that in eight years? how can you honestly look to a lot of predict how can we allow those folks to get away with something like that when the president said before he was elected that it was unpatriotic to be able to and spend money on the chinese credit card? that is an outright lie. for that to have been checked, please tell me. guest: to answer your question about the spending, this has really dominated a lot of debate particularly among budget two. this originated with a commentary on a financial web site called market watch.

it claimed that obama's rate of spending increase was some of the lowest since eisenhower. we actually fact checked the facebook post on this. it said that romney is wrong to claim that spending under obama has accelerated at a pace without president -- without precedence in recent history because it has risen slower than any time in nearly 60 years. so the part about romney we called false. the second part about the spending increase under obama we rated that have true. we gave that post a mostly true overall. i think you touched on this in the question, the reason has to do with how you allocates spending from president bush to president obama. he allocated some two obama and

many conservative analysts felt that he should have allocated more. we looked at all different ways. we posted an update to this on thursday or friday. just to clarify for people that we called that portion after. that's why we have the truth meter that there can be truth to things but not full truth. people can disagree on how to allocate the money from the 2009 budget year. depending on how to allocate, it can look worse or better. for better what we tried to do is give you the tools to understand what is happening and then do the best we can to make a call. but this one has prompted a lot of debate, not just our rating, a poll commentary that the writer made. i think we will hear that claim more during the presidential campaign. host: i want to take you an

american future fund ad on claims that all street supports president obama and then get your thoughts afterwards. >> i did not run for office to be helping out a bunch of fat cat bankers on wall street. >> gas who gave $42 million to obama's last campaign for president? wall street bankers and financial insiders, more than any other candidate in history. >> helping out a bunch of fat cat bankers on wall street. >> but obama voted for the wall street bailout. >> fact that bankers on wall street. >> his white house is full wall street fat cats. his foreign intelligence officer, ambassador to germany, treasury secretary. jon corzine, lost $1.2 billion of investors' money on wall street, was obama's advisor on the stimulus. host: why was this mostly false?

guest: we were factored in the underlying point, which is obama is the preferred candidate of wall street. if you look at the center for responsive politics, which is a great web site that keeps this data and really arranges it in ways that you can make sense of it, it is not the case that obama is the preferred wall street candidate. mitt romney is. and so, although we found some truth to this, but obama has gotten considerable money from wall street, is not the case that is the preferred candidate. they used the data in a misleading way. so that got mostly false. our definition of mostly false of truth but leave out important information. phones. clinton, tennessee, dana is waiting on the republican line. caller: i find it incredulous

that the first ad that obama tried to blame romney for access bain capital when he had not even been there for two and a half years and you said that wasand the latest thing you said about wall street, wall street did give obama all the money in the last election. i am sure they would prefer running since obama has called up this economy. but in the last election they gave the money to obama. that's why none of these people have been prosecuted. eric holder is not going to do anything to prosecute these friends. let like a liar, pants on fire. guest: i would encourage you to read our articles and i think you'll find there's tremendous step and research that go beyond these decisions. as i said a moment ago, i don't expect you agree with every rating that we make. in the same way that if you are

yankees fan or red sox fan, and home plate. what is interesting to us is that both sides to love us except when they don't love us. that's the nature of the kind of work we do. we are doing our best to make research and we are looking at these things. but in our very partisan nation, it's natural that people who are very partisan will look at our work and say you are biased. territory. host: along with your award for covering congress, you also won an award from the society of professional journalism, the sigma delta chi. irving is waiting on the democratic line in detroit, michigan.

independent line from new jersey. caller: good morning. i think it should be global lists versus nationalists. both of these candidates are b -- are globalists. there was a foreign student who got into ivy league schools. and with romney, nobody is looking at the tax returns and where the money is. between these two? host: have you looked into romney's tax returns? that was a big issue during the primaries. guest: the only one that i can recall, there was a claim about his refusal for a long time to

release his tax return. i know that he has released at least one year. that may be all. i don't know that we have done a lot of fact checks on that. we tend to wait until someone makes a claim about his tax return or about his wealth. and then we wealth. we have to wait until a claim becomes part of the political discourse. we did a lot of checks back when donald trump was thinking about running for president, about some of his claims. one of those that the caller mentioned, his school days. said was nobody remembers him, almost like he miraculously appeared. gone to school with him. i think donald trump earned a pants on fire for that one. host: gwendolyn on our

independent line from chicago, illinois. good morning. caller: good morning. in cook county, illinois, they don't allow people to bring any independent audio or recording devices divorce court or family court. is this something that could be checked? guest: i don't think i hear a factual claim in that. and as a politician, and alderman or someone made a claim about it, at this time we don't have a partner in illinois. we don't have anyone who could do that kind of check. illinois as well as other states where we don't have a partner. host: have you found in a material so far for your big lie of the year? guest: it is still pretty early. other day. i don't think that there's a clear favorite at this time. we are hearing reruns of

previous lies of the year. one that we heard in ohio the other day was the claim that the democratic health care law is a government takeover of health care, if which was our 2010 law of the year. this is an award that we give out once a year that gets a lot of attention. we are still looking. host: bill adair of politifact, thanks for joining us. politifact.com is the web site. we will have you back again hopefully later. thank you for having me. >> some of the promises that they made to consumers. i think self-regulation is a tool that can be much more

responsive to changes in the marketplace and a quicker way than regulation. >> tonight a look at the federal trade commission's enforcement controls. "the >> we go live to the national press club in washington. chris matthews is the featured speaker at this year is gerald ford foundation journalism award. among the winners is scott wilson and coreen wiley. >> more information about the national press club, visit our website at www.press.org. to donate to programs offered to the public, please visit

press.org/institute. on behalf of our members worldwide, would like to welcome our speaker and those attending today's events. our head table includes guests of our speaker as well as working journalists who are club members. if you hear applause in our audience, we note that members of the general public are attending so it is not necessarily a lack of journalistic of gentility. i would also like to welcome our cspan and public radio audiences. our luncheons are also featured on our member-produced weekly podcast from the national podcast -- for national press club available on itunes engine and follow the action on twitter. after our guests speech, we will have a question and answer segment and i will ask as many questions as time permits. i like to introduce our head table guests and i would like each of you to stand up as your name is announced. from your right, keith hill,

kevin mccormally, andrea at stone, scott wilson, liz spade, steven ford, allyson fitzgerald, chris matthews, ken dalecky, joseph calavaruso, corinne reilly, julie bikowitz, mark

shans, [applause] the national press club is honored to host the gerald r. ford presidential foundation for the presentation of its annual awards for outstanding reporting on the presidency and national defence. our club had a long association with the 38 president of united states with the foundation which carries on his legacy. gerald ford spoke at the podium a record 18 times, appearing before, during, and after his presidency. some of you at this luncheon have personal recollections of president for possibly biased toward presidency and his many years of public service.

the loyalty inspired among friends and associates is a tribute to the kind of person he was. president ford died in 2006 at the age of 93 and his wife betty died last year on july 8, also at the age of 93. reporters who met president ford did admired his dedication to a free and unfettered press. though the press and saturday night live or not always kind to him. time magazine covered many presidents. they once said that ford was the only president they knew that genuinely liked reporters. former secretary of state henry kissinger, a member, of the ford presidential foundation board of trustees once told us that gerald ford was probably the most normal person ever to assume the presidency. perhaps because he did not seek the office in the first place. the awards being presented they were established with present

for's support for a free press and the vital role it plays in been forming our citizens and preserving our democracy. steven ford, chairman of the presidential foundation, will now make this year's award. mr. ford? [applause] >> thank you, theresa. it is an honor to be here and dad had a wonderful relationship with the press. every morning, he would get up and to his last day, he would have a stack of five or six newspapers that he would read every morning. the last one he read was always be "grand rapids press."

he said you know what congress and the white house is doing because of "the washington post" you find out of it is working when you read your local newspaper. that is where he thought the rubber finally hit the road was the local press and they were the things to find out what people were doing in washington, d.c. and if it was reaching the people. that was his theory on the press. i am honored to be here and the ford family is glad to be here and we have trustees from the family. my sister susan and my brother mike, if you guys would stand and say hello? [applause] i want to thank chris matthews for being here. i want to thank the winners. we are proud to have you here. every time i come over here, i think of all the stories you guys missed and did not cover. i was sitting at the head table and there was a story that dad

and mom had a dog, liberty, a beautiful golden retriever and one night, liberty had to go use the facilities on the self lawn of the white house. she went over there and she nudged data and got him out of bed and he put his robe on and slippers and took the dog down the stairs, down the elevator to the diplomatic entrance at 2:00 in the morning. he goes out the diplomatic entrance with the dog and walks out on the sell lawn and a dog does its business and he turns around and the secret service had not realized he has left the building. [laughter] the next thing you know, dad is standing at the door because the door has been locked in his pajamas with the dog knocking on the door to get back in the white house. that is the story you missed. [laughter] let's get on to the business of our winners which is the most important part of this day. i will start with our journalism award, the gerald r. ford in

journalism prize for distinguished reporting on national defense. in 2011. ur winner, coprinne reilly, and the judges have selected her of the virginia pilot as the winner of the 25th annual prize for distinguished reporting on national defense. from this remarkable group of entries, the c judges,orinne and given her this award. her poignant writing which covered the nato combat hospital in kandughar was horrifying and written at the same time. you could not put her were down once you started reading her series of articles. this series at the entitled "a chance in hell," described the military system that ties with equal determination for survival

of all the seriously wounded patients from soldiers in the field to sam, 80 years old, to a 10-year old aircraft and child shredded by an ied. it provided a window to the wounded soldiers but to be emotional impact on international medical teams and care givers who treated them. in a very direct way, the seven articles helps bring the reality of war to a public largely disconnected from that war. the judges were impressed with the clarity of her writing, her straight forward conversational style, largely without the flourished of adjectives but nonetheless powerful and profoundly moving. the judging panel felt her work help foster better understanding of national defense issues and more than admirably met the foundation criteria for

quality, in such a mess, resourcefulness, and brevity. if you would please come up and we will give you that award. [applause] >> thank you. >> thank you, i went to afghanistan for this story with a photographer from my newspaper. both of us had been to conflict zones before but it is safe to say that we were truly blown away by the level of sacrifice that we witnessed at the

hospital in kendra park. -- kanduhar. we thought the best we could on a rigid honor the sacrifice was to document as faithfully as possible and if this or is any indication we succeeded in doing that, i could not be any prouder to be here. of like to thank the ford foundation and my newspaper, " the virginian pilot," and everyone who worked on this series and most importantly, thanks to everyone at the kanduhar hospital for allowing us to document their important work. [applause] >> our second award winner is for distinguished reporting on the presidency. the judging committee has selected scott wilson of "the washington post"as the winner of the 25th annual gerald r. ford

prize on reported on the presidency. covering the presidency with distinction in modern times is uniquely challenging. a large number of highly talented reporters, the best in their respective organizations, are all pursuing this same news story every day with a limited number of discipline and sources. there is extreme pressure and it can be applied on those who go outside of the familiar narrative. in this environment, that encourages conformity. scott wilson of "the washington post"stands out as a nonconformist. , bringing his readers on the scene analysis on the white house activity that is not available anywhere else. he readily places he events in historical context. he illustrates colorfully anecdotes and first tent observations and explains motivations and reports on what

the president does and equally important on what the president does not do. in short, he educates his readers and helps them put in the confusing din of daily news coverage into an understandable context. wilson is able to write critically without being offensive or partisan. he reaches out broadly to sources both inside and outside the white house, yielding an even-handed perspective on performance and results of the obama presidency. he is equally at home with domestic and foreign policy, politics, and personalities. he is adept at spotting a trend and explaining it and his reporting frequently becomes the instantly accepted wisdom in washington. scott wilson writes for the serious reader. he consistently meets that

readers' expectations. in every respect, the judges found his reporting on the presidency in 2011 outstanding. scott? [applause] >> thank you very much for this honor. particularly to the ford family and foundation, it is truly humbling and means so much to me and my family especially my kids who got out of school to be here. i can feel the pressure building for next year already. i began covering the white house three years ago. it was my first national summit and followed eight years of

reporting from the post for overseas. we're witnessing describing and explaining where the hallmarks of foreign correspondents, chiselling the small cracks in the cement wall around this president to get a glimpse of who he is an awhile what he believes is a different challenge. it is one i would have been unable to confront the fact of life had i maintained my son to trying. it can be hugely a frustrating assignment, fast-moving and superficial and having editors and reporting partners committed to death than originally despite the competing narratives in the competitive age as my learning curve less steep that would have been am reporting more fulfilling. this prize honors more than one person. it is the story of countless hours of brainstorming, argument, painstaking editing and the generous promotion of

colleagues who make me some is better than i am. i like to thank some of them. my managing editor, liz spade, had a compass to give me this assignment and has been encouraging ever since. my national editor, kevin merida, i have admired his work long before it began working for him three years ago. he is a great inspiration. you want to you -- to do your best for him. his deputy, cameron barr is simply the finest editor of words i have ever worked with. our partnership began years ago when i was a correspondent in jerusalem and continued on the foreign desk. his guidance and creativity are the driving force behind much of this work. and much of my work over the years. i owe him a huge debt of gratitude. the post has been a wonderful professional home to me for nearly 15 years and it is not

only because of the editors and fellow reporters. covering such a closed institutions and private president is difficult. chris is the state of the art of reporters. he has donated his ideas and knowledge that kind of promoted my work among his legion mytwitter followers and television viewers. to all of them, thank you. it is a great thrill for me to work for the grant family and i trust them implicitly. last but not least, i would like to thank my wonderful family for putting up with me.

my wife andrea, my daughter is kat and meg and ben - my son ben. i bring my work, literally and figuratively and they become used to it. their curiosity about what i do, sometimes confusion about what i do, and patients with may cheer my frustration and self doubt. they are fun and make the work fun. your the best things about me and thank you for being here to share this humbling moment. thank you all. [applause] >> let me close out my part of this program. we had two great winners and i want to mention we had an honorable mention. we have several judges here and some of them are trustees and some of them are not. the judges felt very strongly that we had an honorable mention for distinguished reporting on national defense.

that would be sean naylor. just stand please. [applause] the judges for national defense selected sean of "army times" as the winner of the prize for distinguished reporting as an honorable mention. but judges selected sean and the panel felt his articles provided persistent insight into a volatile, dangerous, and strategically critical part of the world. his in-depth research, excellent sources, and ability to connect the dots provided important information in an area that has to date received relatively little attention in the press. thank you very much. ." >> thank you and congratulations to this year's winner. president ford once said that i

have had a lot of adversaries in my political life but no enemies that i can remember. one of his political adversaries was thomas p. tip o'neill. they served together for many years in the house of representatives. o'neal and four were friends despite their political differences. the gerald r. ford park foundation will be honoring that relationship in a dinner tonight. he was speaker of the house from 1977-1987. towards the end of his career, he hired our luncheon speaker to be his press secretary. chris matthews was born in philadelphia and graduated from the college of a holy cross in western massachusetts. after coming to washington, he worked as a u.s. capitol policeman before working for democratic members of congress and as a speechwriter for jimmy carter. he worked for a mill for six years during as baker's lot --

epic legislative battles with ronald reagan. matties work in washington for san francisco newspapers from 1987-2000. he started his talk started" hardball" in 1997 and in 2002, he started the syndicated weekly political talk show, "the chris matthews michaud." he is the author of six books. ladies and gentlemen, please join me in welcoming chris matthews to the national press club. [applause] >> thank you. it is great to be here for gerry abd tip and their friendship. by the way, congratulations, corinne. i couldn't believe your nervous here but i am never nervous you're going to have a dentist

and get to me and scot you are great prepa. every time i cover campaigns and that was the people at the quality newspapers i watch them file things and check things, i pick up the paper and a beautifully turned out facto peace, i was blown away by this trade reporters. commentary is easy. but reporting is work. you guys are good. i want to talk about what is going on today and the way it used to be. i always tell kids after i write a book -- on father's day, they sell 1/5 as many books as christmas. i always tell young people that it is all true. times have changed and you have to tell them about the past and i waited your parents and as a new grandparent i feel the responsibility to tell people

about the past. my parents always did that and made me see much older than my age because they always told us about the world war two. there was before the war and after the year -- after the war and housing was never as good people like catholics got in the door after the worst of good things happened. politics is different today. i don't think it is better. my secular religion after being here for years, the city without smokestacks and factories, we only make one thing. the only thing we make is deals, good deals, compromises, it is called government. we come here from different points of view and keep our points of view but find a way to govern this country. that is what we do. that is why we are here and that is why we cover it. it is important how we run this country. people come here with another point of view and the only point of view is to make the

government work. i think about the different directions we come with. the speaker at one point of view and gerald ford had another. i think it takes a couple of things for the city to work. you have to listen to the other side even if they are lamebrains. you have to listen. you have to listen to the tea party, they might have something, maybe. you have to listen. it like being married. [laughter] the guy's got all the good girls, listen. you have to be willing to negotiate because you will never make a deal or arrive at an agreed upon direction for the country. we would just have chaos. right now it is something like that. i want to talk about jerry ford and tip o'neill. when tip o'neill -- tip o'neill was one top boss. -- one toughed boss.

i knew how tough it was. tip o'neill had one great quality that made him a man of the house, he loved it. he loved that place. it is like san francisco, if you love san francisco, they will love you. the one key entry would go to san francisco, tell everybody love this city and you will be incredibly welcome. loving the city is what reminds everybody. what makes you a man or woman of the house is you love the house. i once told jerry brown -- he asked why anybody would run for the house. i told him the camaraderie. he had no idea what that was. hanging out with the men and women of the house is what it is about, sharing the community. tip o'neill love the the floor. they were both floor leaders. they like to be ready action was. they liked the cloakroom. the democrats had their cloakroom chez ramone but

everybody would go there for lunch. he loved junkets. it is the best thing in the congress. it is a time for the husbands and wives to get together with each other and creates a wonderful friction remover. you are able to get mad at someone else but your wife will say you like that guy. it is amazing how it cools things down on both sides. jackets are expensive but after two weeks, you'll probably be friends. he also liked the food in the dining room. he loved anything they had been there. he loved the gymnasium. he would grab a handful of cigars and said to his secretary, allen r. i am going over 48 rub. you had to be there.

they love the other members of congress on both sides of the aisle. a few people bother him greatly. there is a group of three stooges and there are a moving group. gingrich at a permanent membership in the three stooges and bob walker as well. there is a phone call for mr. walker and he takes the phone call and this is out worked. it did not happen often but it was somewhat mirthful. jack murtha was the one who did it. his friends were not all democrats. he had some really close friends, george bush's senior was a close friend. they both loved the house because the house was something that george bush won completely on his own he did not get in

there because of coattails of president reagan. he got elected on his own and that means a lot. i think that's why gore tried to do it but he did not quite make it. he liked george grossinger a lot. i can probably guess what he thought of dukakis. he really liked bush anti -- and he loved bill conchie, he and bob michael were buddies. he really loved gerald ford. he talked about him all the time. he said he is loving the good life in palm springs. he dresses for dinner now. he doesn't fit in. it was great. it was always about status. i could tell when his real

friends or around because it his face would break into a real non-political smile. that would happen one ever israel bodies were around light murtha. rosti would come in and be jealous. club, like a little boy's like a tree house. they were proud of the people's house. compared to the august u.s. senate. tip o'neill said it was filled with the 88 sons of the rich. i loved it when he talks like that. -- he said it was filled with the 88 sons of the rich. he is to cut the lawn at harvard. he is to cut the lawn which years in the 1930's. the over seton -- the overseer

would get him to work pari. i think he would sit around and even members of the congress would save seats. he only ran against a communist widespread he got elected 50 elections in a row. there were not all close. the great thing about the house compared to the senate is you have to stay in touch because they have elections every two years. you also have to worry about a young opponent in urban areas. tip would read,"the globe."

i have a great respect for people who lead when it is tough, when you are politically incorrect, not when it is you everyone light. ronald reagan will be remembered for his consistency end his career that preceded his popularity. , just like churchill. your rights respected for being right long before was popular. they don't want people adjusting every year to what is popular. they love people who are consistent. tip o'neill was like that. when i was with them, those years were brutal. he said be nice to president reagan. that was tough. he was not popular. liberalism was not in fashion but we did pick up 266 seats in 1982. it is tough to get our plans

with everybody hated you. tip o'neill wound up getting great popularity but it was tough. jerry ford did something as president that i didn't like. he pardoned nixon. when you think about what he did, it was very unpopular and cost and the presidency, he had the courage to do what was right. if we let the richard nixon problems remain our problems, we would never have gotten out of it. it would have been three more years at least a fighting over him. instead, he said let's start over. i think that was an example of country first. that is not a bad mother. motto. i was warned when i went to massachusetts and looked in the first pew at st. john's where tip o'neill was christened and was married and buried to see

jerry ford in the first pew. it was nice to see that. they stuck together. tip would have been there for jerry, friend. that is the way it was in politics when i worked in that. i got to love this cycle of the week of the house of representatives. monday was always come back today. tuesday was the general debate, wednesday was amendments, thursday was always final passage, and when all members would comment, it was just like in mr. smith, they would come in and watch closing debates between people like jerry ford and tip o'neill when they were giving their best and everyone would be there. it was great drama. i remember one thursday night -- they had a hot debate, a

really hot debate on thursday night. one guy had been yelling red- faced at the other guy from the other side of the aisle. they're debating heatedly. as the room began to empty out and everybody went to catch their playing thursday night, it was like an accordion closing, everybody is leaving, this guy walked across dial and said to the democratic member, what are you doing this weekend? it was the guy he was yelling at. he said say hello to your wife for me. that is what it was like and that's what was like the way jefferson wanted it, the way madison wanted it, and that's the way it was with jerry tip, the old days. i want to thank you for letting me begin my conversation about current events that are not as pleasant. i want young people here and there are some of them here,

where are you? i'm a grandfather. it is all true. it really was like that, thank you very much. [applause] >> now for the fun stuff. do you feel that political talk shows like yours is responsible for the growing lack of civility in our discourse? [laughter] >> not at all, it gets off your chest. i think it can. there is a tendency of people to only watch the road show. i think you want to look around. take a look at fox once in awhile. if you don't like it, take a look at it and make sure you don't like it. i think you're crazy -- the days of walter cronkite are over. that's the way it is will not work again. it is too many points of view. i just finish the cronkite book which is excellent. he had a point of view and we

all knew it. he was a liberal the whole time and we all know it. he did not know we were aware of it. he is a great reporter and an honest reporter body had a point of view. those points of view or more transparent. there is more knowledge if you watched television, you cannot tell the difference between fact and opinion, that is rare because almost everybody can. i think al sharpton is known for his points of view. they know what they're getting when they watch him and i know where i am standing very i think people are smarter. they no opinion. they know facts and i think they want three levels every night did the 1 fax, the news, they wanted around 5:00. but what now. the wants and what it means that i want to know what you think. what my shirt to find out what you think. we fight over facts. i say every fact must come from a quality newspaper. it may come from ap but i don't

want to hear it comes from anywhere else. i want facts. we do announcements and we want to be smart on the analysis and with the opinions. i tried to do all three. i find that people tend to vote after they watched me. i cannot imagine being able to follow my show without reading a good newspaper. secondly, i cannot imagine watching a show like mine and not being committed to vote. it forces people to read the paper, if you like it, a widethe lehrer hour, george stephanopoulos is damn good on sunday. put it together. angryt know anybody gets after watching television. many people get confirmed in their views. there is somedittohead thinking. i don't think they are growing. [laughter]

[applause] >> how would you rate your show -- left or right? >> i would say we are 40 yards left -- 40 yard line. my voting record is not consistent. i've pretty much advertise how i voted my views on a lot of things -- i thought the iraq war was a disaster. i am right on that. fiscal policy, i want to see a long-term -- i want to see my daughter work for the debt commission. i think the president should have staked out a position on day one. if he had done that, he would've been better off. he should have gone with the

keystone pipeline for jobs. i cannot think of the environmental reasons because nobody has said what it is. he should have sold more health care and explained why it is important to the middle class. we already have a health-care program for poor people called medicare. this is a program to be fair to the middle class and force them to pay their share. he never sold that way because he had to keep the left happy. it was a conservative proposition and never sold properly. i think it is pretty critical. i think the have put it together. i have been doing this longer than anybody. i have been on live television since 1994 every night six times a week and everybody has figured me out. i think people are smart. you get to know the person after a while. i think. >> what do you make of the

changes taking place in the media? what about the decline of traditional newspapers and the role of new media? >> i love newspapers and editors. i don't know where i would have been without them. there is nothing like turning in a take out these friday afternoon and getting the call back that i have two or three questions. where did to get this? was this officials? it is great. you get the call back that you are free. you are off the weekend. i love to be edited. i tried to edit the people --who wrote this? there is an expletive there. i have an instinct for what may be wrong and get everything but

you don't have a corrections page on the internet. i want to know who the editors are. everybody reads upington but editing will be a big part of it. can i just have opinion pieces. fact checking, i worry about it. i always wear -- worry about weekend wire people. young people don't know the history and they will let things get by them and it drives me crazy. but controversy -- the controversy over a spy. there is some controversy. he was a spy. i like to see adults editors. in social medea, i worry because people come up with something they throw on a blog. what are you not pay attention to blogs? don't read any of them. that would be my view.

is that liz over there? i did not count you. you are a real journalist which is different than somebody in their basements asking for pancakes said it brought down the government. first of all, get a job. [laughter] [applause] high making enemies now which is part of my life. i like journalists, i love trade reporters, i am fascinated by the ability every day of a1 reporter is that right for the first page and they are astoundingly good and their editors are great. what goes into these newspapers in the news section is spectacular. the quality of the op-ed pages in the times and the journal -- the times and the post are really good. the screening that goes on the

best cases, we have great journalists. i get up in the morning and i read "the washington examiner." it has a lot of little items and it has some right wing people that are good prepa. then i read "the washington post." i read a different ways. i checked a style page. i always read the op-ed page and then i work my way to a section. there's a stop on a page right before it --al kamen is fabulous. i read "the times." you have to get your speed up to read the times. you have to get ready for the

times. by an ambitious, go to the journal but my wife reads that. she is in business. if you put that together, you know i lotte a lot. if you want to know more, turned on yourxm radio and listen to one of the three news network. i flip around and it is fabulous. i go from cnn and check fox because some of them are ok. s not big onean but - [laughter] o'reilly is a mixed bag. he is not just a right winger. he is an angry irish guy. there's something to him that i find unnervingly truth sometimes. i like his attitude. people have to put -- i give this speech to everybody -- and there will not be an uncle walter to tell you exactly what is what.

the big networks had established liberalism as their base true north. that is what they were, walter cronkite and edward r. murrow. it was a point of view. they laughed at goldwater. cronkite mocked him the way he pronounced his name and it is true. barry goldwater said today -- you know where he stood. the idea that there was objective reality is a mistake. >> obama promised the public and journalists you have the most open administration in history. as he delivered? >> i don't know what the question is really. >> transparency -- >> i don't know what the relative scorecard is. is that something we could find text do you have a point of view on this? >> i am moderator.

i don't have a point of the [laughter] u. when he came to office, he said he would be the most of but -- open and be having press conferences and be open. >> i don't count them. the daily press, ja andy carney journalistsgi andbbs is smart. he beat me at jeopardy a couple of weeks ago. he has a lot of press conferences. people are not dying for more press conferences. i don't that is a big issue. i think mitt romney is used to a business press. they only seek journalists when they want to see them. i don't think he spends a lot of time answering questions at the rope line. it is not a big issue with me because i am in commentary. reporters have to deal with this

by getting up close to them. i don't have the ability to judge that. you might ask schock or someone else here. chuck for some of tear. >> why has compromise become so unacceptable in congress? >> because of the way the voters are behaving. i grew up in a ticket-splitting state and pennsylvania. you would vote for the state representative and senator because you wanted your kid to get a state scholarship. you would vote for the congressman because you are hoping that your kid would go to the service economy that's where it worked when i origin where i grew up. it was also a purple state where you have almost every election except two of the 20th century were split. if a governor and senator were running that year, it would go both ways.

it was like this all the time. bill scranton could be popular and jack kennedy could win the state big. there are no ticket-splitting states left free this year will see less ticket-splitting than ever and people will vote straight. massachusetts could be the exception because scott brown is in the running. he may even be slightly favored. people will generally vote for the president if they vote for claire mccaskill. i look of the tricky mass t -- rickiness. had the vote for george allen and barack obama? that's a tricky one. the other thing is the way our districts are broken up by neighborhoods which are segregated.

as a younger person, the only person you have to fear is the person to your left. er neverr by going to your left as it -- in the black caucus. the tendency is to heads toward the save and of your party's spectrum. if you're a liberal, you are probably 100% rating. in politics, it is safer to be with your base. these men and women tend to vote with their base. it is the safest mode and you figure you'll fight it out for the independence. a member of congress just got beaten any said there 40 house seats that are up for election but the rest are taken. you can i use -- you cannot lose a general election. california has a new system or the top two vote getters get to run in september. that will not be a big surprise.

the voters are -- because we have been apportioned and gerrymandered, you don't have many seats. you have been in places like bucks county. these are selling seats and eric toth. -- these are -- there are 40 seats and they are tough. how many seats are like that? dingle is still here. these guys are here for a long time. massachusetts does not change. you have these one-party districts and you have this kind of voting or the don't want to risk going to the senate because a young kid will come along and says he sold us out. luger just got bombed, bob bennett got bumped. orin hatch could get bombed in

utah. it is sad, i think, that you cannot put it together yourself the way reasonable people do. they don't buy the blue plate special. voters love union and they are pro-choice and they go down the list and every single thing, they are against free trade. there are some but they are about 30%. wene left i like it when people say on one issue they are not with the party. you hardly ever hear that. then you are marked as some kind of pro-life and not. nut. if our voters become independent, we will have more independent politicians, i think. that's a sobering isn't it? >> what you think the biggest mistakes of the obama and romney

campaign have made so far? >> romney has not made many mistakes. he has the strategy of being the last man standing. it does not try to sell his personality. [laughter] it is like roller derby. just not the other guys off the cores. court. you cannot hide from the incoming. it was a relentless negative advertising. it was done by these super packs. like restore our future. he got the nomination through a process of elimination. i have not seen mistakes from him because he has won every contest. they are all endorsing him to various degrees. women are coming back. the republican party has starkly falls in line.

they don't fall in love, they fall in line. democrats have to like you. republicans are an organized political party. which is unusual. growing up as a kid in the early 50's i watched the conventions and there was a woman at the head of the convention that asks the delegates to clear the aisle and i never did. that was the democratic convention and at the republican convention when they were asked to clear the aisles, they did. they are obedient. the democrats look at who's popular. the republican party would not run a guy named barack hussain obama. bush, let's go for a wild guy, bob dole. the republican party insists on

you being around a long time having lost a number of times and being beaten up and gone through this horrific cases and when you're through, they run you. they finally ran john mccain. he is the perfect republican. these other guys come out of nowhere. bill clinton? it is unbelievable. when you lose as a republican, they run in next time. in the democrats you lose, they shoot you. like al goreople have to grow bear to go into a cave somewhere nobody knows where michael dukakis is right now because no one has ever asked. if you lose the democratic party, you are finished. you lose the republican party, come on back. jack kemp is available. let's put on a ticket in 1996.

let's bring dold back. 20 years later they brought him back. who wanted that? it is a different culture. the democrats are a hot hand political party. if republicans had run john mccain the first time, it would have been interesting. if nixon had won in 1960 before the end betterment, it might have been different. they wear them out and they get better by the time they get in there. you have to completely back to everything. on the mitt romney is driven by hard principle. whatever they wanted in a commencement speech, he would give them. he tells the neocons everything they want to hear. he will do the same thing with grover norquist on tax policy.

nordquist is allies say the name. donald trump is proof of the pudding. anything he wants to get, it is unbelievable. he is like the golden idol. why? he wants to keep the party together and wants all elements of the party. he said he wants 50.1%. if you want transparency, you'll get it from him. he tells you how he will win the presidency. he will accept what these guys want and will become independent of them every gets in. that is the trick part. he is a moderate. i think he is a practical guide but how many deals will he strike? the obama mistakes have been pretty obvious. he should have explained health care bill as a moderate republican plan coming out of the heritage plan.

it is not socialized medicine. he should never have let that get started. he never should aboard the used stimulus. it is the worst word in politics. it -- it says it is wasting money. stimulus means nothing. it means road building, stop that mean something, not just pain of states and localities by muting their bills. eisenhower build the interstate highway system. do saysa * -- has to ira rebuild the automobile system and now i will rebuild the highways. both trends are all over asia and we have amtrak. we should catch up in the world in our public sector. the jobs that have disappeared last four sector have been in the public sector. private-sector job growth has

been there but it has been offset by pullbacks and laos in the states and localities across the country. it is ironic that nobody knows that. interest rates are 0 and people are sending them money to germany. invest in infrastructure and put people to work. i'd think he should do it until the republicans to no say. they are saying no to everything he is saying. he said, but something big. does not think big enough. just like truman did discuss, call the house back into session and posed a problem. we have this many people unemployed, let's put them to work. let's do it. at least then, the public would know what the election is about. that would be and my advice on how he can fix it. [applause] >> we're almost out of time but

a couple of housekeeping items to take care of. i got one more for you. i want to remind you on june 9, the press club is having its 15th annual 5 k race. there will be pancakes. tony horton will be here. >> how many miles? >> and 3.1. you don't even have to sign up. i would like to present you with our traditional coffee mug because the islamic her coffee tastes better when your facts checking. my last question for you is what do you think about how you are portrayed on saturday night live? >> darrell issa armond is a genius. he does clinton like he is clinton. it is unbelievable. i went there once and watched

and just call laramie. before they start at 11:30, they are actually live, a dourhammond would be prowling around as cheney. i like him doing me, too. thank you. >> thank you for coming today. reminder, you can find more information at our website. thank you. we are adjourned. [captions copyright national cable satellite corp. 2012]

[captioning performed by national captioning institute]

>> tomorrow, voters will cast their votes in the wisconsin governor recall election. join us tomorrow at 6:00 a.m. eastern where we will replay their final debate. do not forget to make c-span york resource about information

about this year's election. watch speeches, political ads, analysis, at c-span.org /campaign2012. >> the ftc has reached a lot of sediments about the promises they made to consumers. >> i think self-regulation is a tool that can be much more responsive to changes in the marketplace in a quicker way that regulation or certainly than passing laws can be. >> tonight, privacy on the internet. ellicott p.m. eastern on c- span2. -- 8:00 p.m. eastern on c-span2.

>> the research included traveling the globe and speaking to the president's relatives and discovering his african ancestors. he also toward the family sites in kansas to find the origins of his mother's family. the book comes out on june 19, but we will give you an early look with pictures and video, including our trip to kenya. join us sunday, june 17, and later that same night, your phone calls for the offer on c- span2. >> the house financial services subcommittee held a hearing friday on cyber security threats. witnesses representing the banking industry's discussed the

importance of information sharing on cyber security threat. this is just over two hours. [no audio] >> please sigt. -- sit. called tohearing is order. cyber threats to capital markets and corporate accounts, and i appreciate the panel being with us today. we look forward to an interesting time. i look forward to the testimony

of the witnesses and questions. we will move to opening statements. i yield myself three minutes or four minutes. again, what we are talking about is cyber attacks and the threat of cyber attacks against economic interests. it is an issue that is of growing concern. a better understanding of the danger that criminals will pose to both consumers, institutions, and agencies will help improve the chances to avoid destruction. there have been a number of attacks over the past several years. intrusions have happened at the department of defense and the international monetary fund.

the chamber of commerce reported its computer and network had been compromised. a lot of services are a big target because where the money is, business leaders are leading the effort to identify breaches as much as possible. the cost to business is difficult to quantify. we must ensure we have the proper safeguards in place to minimize future attacks. consumer confidence plays a significant role in any transaction. just as there have been numerous instances of that identity theft, or individuals have credit cards , there has been a rise in corporate account

intrusions as well. attacks come in many shapes and sizes. recently, identity theft costs americans $37 billion in 2010. i cannot think of a less appetizing some area to have somebody else accessing my information for their benefit. recently there have been a rise of corporate account takeovers. this leaves small businesses seeking solutions to safeguard their information. markets and clearing houses have spare the high-profile attacks, because of their hard work. partially because of the way they are constructed. they are still vulnerable to a denial of service attacks.

as we saw the attacks a decade ago, our markets are resilience, and they have become more resilient ever since. it is important to let them tell the story today. we're holding this hearing to discuss threats against our industry and discuss how we together can better prepare against future attacks. we must remember we must remain vigilant when we are protecting personal and financial information. much of our economy is reliant on the internet today, that we must not be complacent and all this. our economy has been a leading contributor to our strength and we must ensure that it is protected against threats. i thank you for your testimony. i will yield back and yield to the gentle lady from new york. >> thank you.

i will be very brief. the security of our financial markets is important to our national and personal security, and the hearing is part of a continuing oversight and dialup we are having about the threats to our markets the impact these attacks could have on our economy, individuals, and government. with the rapid pace of technology and the growing number of threats across a wide range of businesses, both large and small, it is truly a huge challenge and one that needs the absolute commitment and coordination between the public and private sectors to protect our markets, to protect individuals, to protect our government. i want to know to recent reports by simmonsnet was excellent,

and stated half our business ie in america are targeted by cyber attacks, and over 232 million identities stolen in 2011, including my own. there is a carolyn maloney running around in maryland. many of us at that inconvenient situation happened to us. and their report they say 5.5 billion total attacks are blocked in 2011, so not only do we have to look ways -- look at ways to continue to block this, but to protect our capital markets and our industries about both public and private, the information we have. i look forward to hearing from

the witnesses, and i yield back. thank you. >> thank you. i will try to be fairly quick. what i am hoping to hear from the panel, and should i be worried there is another one of you running around in maryland? >> there is. the fbi is looking for th em. >> the way we allocate liability -- are we treat incentives or disincentives within people in the financial food chain and best and others to not invest? it is a side to start. i would like to hear and understand how you coordinate talent, technology, data, information about best practices. number three, i'd want you to either assuage meet or agree

with me -- i am one of the members of congress who has a great concern that a growing governmental role in the whole issue of cyber attacks and data protection, the government so moves so slowly that will they make reaction times worse and therefore raised our exposure? that is a concern, and i would like some definition back -- are we making it more difficult to react instantly? i yield back. >> thank you. >> thank you. i appreciate you holding this hearing. i want to thank our witnesses for taking your time and joining us today. i believe our markets are a driver of our economy and

productivity, and technology is the most advanced in the world. today we face increasing threats of cybercrime. sophisticated viruses and now we're not threaten our commercial business and individuals, costing billions of dollars each year. it threatens our power grids and national security. that is why it is critical to focus on this issue at to strengthen the safety of our financial sector against cyber threats. every day literally hundreds of thousands cyber threats hit our financial institutions, and many people did not recognize that. it is something we need to be prepared to act against. i am confident my colleagues and i shared goals. we must maintain our existing infrastructure, and identify all security breaches. second we must share all relevant information to facilitate a fast and effective

response. we must do this in a way that does not unduly for dupont privacy rights, consumer rights, or the tragedy of business contracts. the private sector and the public sector must work together in leveraging existing institutions to the fault increasing cyber attack complex to be. the private sector must be able to work with law enforcement agencies to protect systems while insuring information is handled securely and is used to predict the. to maintain the public trust, the financial sector must remain committed to maintaining personal date and intellectual property. i want to thank the witnesses for sharing their experience with us today. >> i echoed those remaining contents. seeing no other opening statements, i will turn to our panel.

as always, for those of you who have not been here before, he be recognized for five minutes. the testimony will be made part of the record, and you can summarize what you have in front of you. good morning. >> good morning. the subcommittee, i am appearing today for the financial services information sharing and analysis center. i want to thank you for this opportunity to address the issue of corporate account takeovers. i have been had information at regions since 2004. regions is a member of the board as asian formed in 1999 by presidential order with the mission of protecting the

services sector against cyber at the school threats. today the fsisac as organizations that represent the majority of the industry. it is important to note industry has spent much time and effort and has worked closely with regulators to provide safe systems. fsisac is aware that criminal actors are targeting our sector. corporate account takeovers is one method of attack. takeover is the unauthorized use of on-line banking credentials, typically obtained maliciously that affects customers computers, and networks. cyber criminals continue to attack business customers' computers by phishing.

in each case the criminals attempt to trick their victims into clicking on a bogus link that directs the user to a server that downloads malware. this software includes programs that captures the users of on- line banking credentials and allows the criminal to impersonate the customer and create fraudulent transactions. over the past two years, losses experienced by institutions and customers as a result of fraud have declined, even as the number of attacks has increased. fsisac recognize the threat but to institutions and confidence posed by these acts. in 2010, as part of our effort to counter at the threat of takeover, fsisac formed a task

force. it recently completed a report that recommends three areas of focus. prevention, detection, and response, in order to ensure an improved and is effective defense. fsisac and its membership have taken steps to limit cyber crime. corporate account takers cannot be stopped solely by the financial institution. all participants in the internet ecosystem have whorl's to play. banks have no direct control over the end customer's computers, nor can banks control what emails customers open or what websites they visit. to increase the security of our customers' accounts, we must educate our customers on the risks, monitor and thomas transactions, and stop

fraudulent transactions. customers have a role to play in burning about threats and practicing safe habits. internet service providers can monitor traffic on their networks for much of this malware. -- enforcement should continue to move aggressively against cyber criminals and that more work on international, legal, and diplomatic levels is needed so all countries recognize this type of cybercrime. i look forward to any questions you might have, and thank you for the opportunity to appear before your subcommittee today. >> we thank you as well.

>> our company is an entity that serves critical infrastructure for u.s. capital markets. our operations are in essential to mitigate risk. cybercrime poses a threat to capital markets globally. a steady found cyber crime accounts for more revenue than international drug cartel in,. there are three main types of cyber attacks. the first involves the theft of confidential data. crimes take over the accounts of victims and either directly steel funds or used stolen credentials for market

manipulations. in recent years dgc witnessed data theft and our industry. the second type of attack involves compromising the integrity of the national market system. the goal of these crimes is to grind the system to a halt. an attack on the hong kong exchange in 2011 reinforced the danger of this threat. these attacks have the potential to be the most catastrophic. the european market was the

victim of an attack in 2011. this resulted in the theft of 30 million euros. while institutions have robust programs, they are not foolproof. i would like to focus on a program that targeted cyber espionage. firms were granted access to data as well as analytical data. the program provided the sector action to detect -- the ability

[unintelligible] a better understanding of the need to develop standards to support the automation of data. the program drove new innovations in the industry. it also prompted other firms to revise best practices. the program was terminated in two dozen 11. since then more than five institutions have threat experienced threat activity. these threats will continue to increase in the future. information sharing represents the most critical line in mitigating risk today. dtcc supports expanding its

reach within the financial sector. the financial sector and government need to move from a static framework to a risk- based one. while important steps have been taken recently, a greater degree of sharing is needed to ensure all resources are working in concert. dtcc stands ready to work in partnership to hardin defenses against cybercrime. thank you for your time. >> i think you as well. -- i think you as well. welcome. >> thank you. my name is mark graff. i am a vice president for nasdaq. having arrived this april, i am

not a newcomer to information security. i have 25 years of experience. i was the head of security at lawrence livermore lab national laboratory. i moved to nasdaq omx help protect another aspect of america's markets. most of the challenges and many adversaries remain the same. nasdaq is committed to a vigorous defense of its infrastructure. i can tell you that many of the same techniques are used to defend nasdaq omx. one key message at both institutions is the isolation of critical systems from the

internet at large. while many of the services delivered to customers are housed on internet-basing web servers and our systems are tucked away behind several layers of errors, such as firewalls and network isolations zones. this is an important distinction to remember, and we should keep this in mind when talking about denial of service attacks. in the troubled maker can run up to the front door of a house and rang the doorbell over and over again. this is what most of the denial of service attacks about two. if customers are unable to reach one of our people in a few minutes, it does not mean that someone has broken into the house. market systems remain secure. we do not rely on isolation alone. a security program using a multi

layered approach. we're developing software and treat information security as a security -- as a critical element for design and implementation. these controls spent our entire network, and our trading systems are protected by their resilience architecture. while each platform is isolated from the rest of the network and from the internet, the system restricts the information allowed to be submitted to get to the use of a protocol that inputs to the platform. it is refreshed at the end of the trading day. no information is maintained beyond the trading day. we have serious concerns about attacks on critical interests archer that are being led not by rove individuals, but by

governments. it is for this reason that we are pleased that both houses are looking at ways to protect our critical infrastructure through improved sharing of information. support that house passage of hr 3523, although there are some concerns about data privacy. we think this is an excellent move in this area. nasdaq continues to be a willing partner with government at every level. the corporate to protect the integrity of our critical infrastructure. it will be my pleasure as the new ciso to expand these

relationships. thank you for allowing me to testify. >> welcome to the panel. >> i am the president up a company which is the technology roundtable. as the recent passage indicates, that industry recognizes the serious nature of cyber threats to its customers, institutions, and the broader u.s. economy. institutions conduct ongoing assessments to identify potential threats and to limit these threats for their operations and of their service providers. this includes providers of services such as clearing, settlements, and accounting. these assessments help assure infrastructure such as capital

markets remain secure. in the battle over security, no one institution can fight alone. at the sector level several collaborative efforts exist. there are associations where institutions band together to identify risks and develop best practices to improve cybersecurity, reduce fraud, and improve resilience. the largest of these collaboration's is the coordinating council, consisting of trade associations, the largest financial institutions, and key participants. the council works with its public sector partner. chaired by the treasury department, this committee includes government agencies with oversight for the financial sector. working together members focus on key issues including the ability to recover but

infrastructures. the two groups sponsor and industry-wide exercise, the latest of which had the focus of the resilience of the trading processes. other associations have form relationships with law enforcement agencies to coordinate efforts to prosecute cybercrime. the industry conduct out reached efforts to other key sectors. one example is participation in the industry botnet group. this group acts collaborative link to the deprived -- the problem of the vice takeover. these are consistent with the recognition that to date's world is highly integrated and relies on multiple providers to mitigate security risk. the industry recognizes the importance of its vacation. consumers and businesses play a

key role and have responsibility to protect themselves. the industry has recognized the lack the skills to do so. institutions have made educational investment. a key area of note is information sharing. institutions currently share information. broader sharing opportunities remain. because of the interdependency of sectors in keep it fresh torture, it is vital to share information across a broad swath of sectors. maintaining the confidentiality of shared information, particularly between the private and public sectors, remains a concern. this will impact the reputation of their companies and their customers' confidence.

the passage of the bill will enact -- the to the concerns about protecting individuals information were raised by several members of the house. as to consider future legislation, we urge you to consider solutions to allow sharing of this type of information under certain circumstances in eight weight that protect the privacy rights, but also facilitate their financial protection. there are legitimate reasons to share this information to benefit citizens. sharing details about customer information would allow institutions to take action to prevent fraud against customers. accept my thanks for the opportunity to testify today. cybersecurity is a vitally important issue.

protecting companies, customers an and infrastructure that support our economy is crucial. we commend the subcommittee before recognizing the importance of this subject. >> thank you. welcome. -- my name greater thanerro my name is errol weiss. i'm testifying on behalf of this trees industry and financial markets association. i will focus this morning on cybersecurity in the cyber services sector and what we're doing to protect customers from

the attacks. the increase in cyber intrusions in the past decade is cause for great concern. members firms are on the front lines defending against threats to the financial markets and we take this seriously. members comply with a number of stringent laws and the protection of personal data. these laws are reinforced by regular corrective review and audited by highly specialized regulators that are supported by and asia -- an agency. in addition, the financial- services sector and analysis

center. i serve on the board of directors. we recognized congress' shares concerns regarding the current supreme -- cyber security structure. we recognize the need for expanded information sharing with government agencies, including greater access. access to threat information must be provided in a manner that provides broader protection without ongoing investigations or the privacy of individual americans. we believe government agencies should let it leverage these and facilitate public-private information sharing that will help institutions better protect themselves. we believe our current regulators are best suited for

regulating critical infrastructure. treasury and regulatory agencies should determine what is considered critical infrastructure. and one size fits all approach is not the right solution. as the amount of cyber attacks increases, the need for new technologies and talents to combat these threats becomes paramount. our nation's universities must develop the nation's next crop of people so the nation can protect itself from a tax. because separate security is a global problem, cooperation with international partners is critical to preventing, investigating, a prosecuting cyber crime. u.s. should seek strong corporation to improve cybersecurity and punish those zero are responsible for cyber

crime. we believe a single notification standalone would reduce administrative oversight, establish clear guidelines, and reduce customer confusion. we have played a leadership role in developing policies that technology to protect customer data, and we look forward to maintaining that role as the nation upgrades its cyber defenses. thank you for the members of the subcommittee for the opportunity today to testify. >> welcome. you're recognized. >> thank you. mr. chairman, vice chairman, members of the subcommittee, when asked on how to be equipped witness come up a good friend of mine told me i needed to do two things. be brief and then be gone. before i am gone, i should tell

you what the problem is an offer of one decisive solution. the key for the opportunity to testify before you today on behalf of victims and potential victims of corporate account takeovers. my name is jim woodhill. was recruited in 2009 to be the advocate for the victims of this new fast-growing crime. i am here because your money is not safe in the bag. not if you are an american church, school district, small business, or political campaign fund. not if you bank online about using microsoft windows. many of you on this committee have heard from victims in your district. organizations are vulnerable is

a policy shared responsibility. commercial accounts are subject to dozens of lawsuits. the consensus is that shared responsibility will not hold up long term. there have been over 500 victims. more than $100 million have been stolen. sometimes there is a settlement reached. more than one bankruptcy has resulted. the latest lawsuit was filed may 17 by a company in california. no matter whose pocket this money comes out of, the stolen moneys are funding an emmy r and d. the thefts must stop. regulators issued guidance in to doesn't but that would have

stopped the crime, and even then solutions or inexpensive to acquire and enjoyed wide acceptance. they were not adopted in great numbers, so regulators issued much more detailed guidance last year. if the solutions were available, why did united security bank signed up last month to spend more on lawyers to defend a lawsuit than the $300,000 it would have cost to reimburse? answer is simple. america must small banks have not gotten the memo. why not? examples from medicine and public health show even when life and death are at stake, it takes 20 years to get new information through a medical specialty. as for educating the general public about infectious threats , public health experience shows

it cannot be done. account takeover can be stopped by the processors, organizations that run online banking on behalf of their clients cannot just as has already been stopped by the largest banks. weighing the alternatives is the victim's first toys. there are solutions that would work. at banks were required to disclose the risks of online banking, then those customers -- then moving on line, those customers could accept those risks or move their accounts. banks would turn to their processors for protection rather than admit that their money is not safe. another alternative is if that fiduciaries of public funds refuse to risk taxpayer

dollars, by depositing them in banks with any history of and reimbursed losses, those banks would do the same thing. regulation could be extended to all accounts, and i have posed this because disclosure or action would accomplish the same thing, and are more free-market oriented. whenever the congress does, we urge it to do soon before there are more victims in the banking system. we must work to make cyberspace a safe neighborhood. thank you for inviting me to testify. >> thank you also for your testimony and being with us today. i think the entire panel. when will turn to questions and then my five minutes i will start from the left and moved down as far as i will go. incidentally, you know it in note instimony -- you

your testimony a reference to the suspicious activity report -- could you briefly dig into that a little bit? >> yes, and i will add that this had been implemented. when the count take over task force -- >> mike -- >> i am sorry. when we looked at the suspicious activity report that institutions are required to file, we noted account takeover was not clearly labeled as a form of suspicious activity, and we recommended that that be appropriately labeled, and that has been accomplished. >> what is being done with that information? >> now when institutions have a situation of account takeover and the report it on the report,

then we can use that to do their analysis and also -- >> what did they do before that? you had a little check-off box? >> before that it was not clear about the method of attack, mr. garrett, and we thought it was appropriate so that the industry could reflect the volume and size of account to cover appropriately, and we felt the suspicious activity reporting process would be a good method for that. >> thanks. mr. clancy, you might want to chime in on this. in order to do so, you have to have a high level of trust, and usually you want to earn trust before you execute on its.

talk about ways to do that, to evidence the trust and enhance ways to share that information between levels? >> thank you, mr. garrett. trust is slow to build and fast to be lost a great the way be looked at it, we started with anonymous reporting. we have removed details of who was impacted, but get the facts so others can take action. there are some limitations in what we have seen. we started to get a small volume of activity, but when they small group of us got together who knew each other socially, professionally, and we said this is what is happening with that report, the greater context came out, and we built a model where we have people in the center who started out with relationships,

and we extended that network. that committee chairs. -- shares. we have built additional rinks. we have started in 2011 and inner circle called an exchange for which is a group of people like myself who are into capital markets and not sharing information about attacks on us. you bring more people into that network and the network rose. the more friends you have, the more friends you get. speaking >> of social media, i read about in the paper about the sncc the other day. -- about facebook the other day. do you want to tell us from the information you have come up with regard to that transaction that was reported, what the

problem was? was there any cyber security aspect to that? what is being done to make sure that does not happen again? >> yes, thank you, congressman. my expertise is in cybersecurity, but what i know is the facebook ipo showed us a design flaw in the methods used to operate the ipo. it has been used successfully for years. now we have engineered a fixed for that the side. we're also looking at the processes we used to develop the software tests to see if we can improve the lives. in terms of cyber security and any involvement with the facebook ipo, on information i have, there was no separate

security element in that ipo. >> thank you. i have additional questions, but my time has expired. ield the gentle lady from new york. >> when there is an attack, help you find out about it? do your customers tell me about it? government? how do you find out about it, and then what do you do? do you report that the government, other companies? how does it work now? we hear that half of the small and large companies are being attack. at the you find out about it and what the you do about it? >> the short answer is yes, all those sources. the reality is financial institutions are constantly monitoring their environment for indication of attack.

at cit, as errol will tell you, there are significant investments in monitoring tools to look at the environment to determine if there are attacks under way. >> these tools you put in place, aren't they your standards -- are they standards that are required by government? the private sector? aren't there any required standards? how are they being put in place? are some companies going beyond that to protect your information? >> the primary standard is an toectation from the agencyies have a strong risk assessment and management process in place. regulation typically does not specify the exact tools that need to be used, and that is

good because it recognizes the environment is evolving fairly rapidly. tool the orchestra they may not work tomorrow. it is largely up to financial institutions to determine the best practices. i would quickly add that to the collaboration's we talked about earlier, and, frankly, most of us at this table have worked together over the last five years to 10 years in terms of collaborative efforts, we go to the process of identifying best practices that we would use answer information on tools that have been effected and try and enhance the industry beyond our own institutions. i will let errol comment. >> i think you answered that really well. >> thank you. i would like to ask mr. clancey

from the depository trust and clearing corp., you mentioned have of dtcc's companies received notice that they are receiving important utilities under the wall street for act and recognizing the new risk management standards for the fsoc are still being developed, what is your expectation about the extent to which the standards will address information security issues? >> i think, and my expectation is their focus is very much on financial aspects up market and liquidity risk. it is uncertain whether or not they will delve into cyber security issues. this are held in the end this thing framework that regulatory agencies have. my expectation is that is how it will be addressed. we have looked at the risk those

systems pose to the system and the global financial system and have been working to elevate our of of of control against those types of threats. >> when a cyber attacks occurs, do you tell your customers, or if private information is extracted on some of your clients, what is the standard you have? how do you address it? are there laws requiring disclosure? what happens? >> absolutely. if there is a breach of information, there is regulation that requires us to provide that notification to customers. >> and basically, what are the three things we have to do to make our country more secure? it is unnerving to think that there are individuals and countries that have entire --

devoted to getting private information of our markets elsewhere, and what are the steps that private industry is taking to protect this? i guess you play a key role with coronation with government. how is that coronation working? can it be improved on? how can we do better to protect individuals, companies, from this type of attacks? >> the key. we have a high amount of public- private information sharing that has been in the oral and written testimony. i think we can do more. but like the government to share more threat indicators that they have with us on a timely basis. this is so we can act on this and prevent cyber crime in our industry. we would like to be in a position to share information safely but the government

without having to go to the score big steps. we would appreciate the opportunity for that to be exempted from the freedom of information act. we would like to do work done in the telecommunications industry. currently, carriers are required by law to deliver everything to the end user. the government knows that some of the traffic that is on our networks is malicious, and if they could give that to the telecommunications carriers and they could be in a position to drop that traffic before it would be delivered to the end user, that would be an appropriate step forward. lastly, again, working internationally on legal and diplomatic levels so that when we say someone is a criminal, that individual is are arrested, tried, and appropriately sentence. thank you. >> thank you. gentleman from arizona is now

recognized. >> thank you. this is an area of great interest. first, let's say citi or a major institution, bank, is finding its system under attack. someone is trite to somehow go up and down -- how quickly does that get shared with others who do you share it to government approval to the industry? through the working groups? how quickly does that information gets disseminated? >> actually, it gets shared very rapidly. it happens very quickly. in that case, to the fsisac and the techniques and trucks that marked another trust -- talked about earlier, we have been able

to create the central brains of trust and be able to share that information quickly. you hit upon a point there. many of us have an automated notification system saying we are seeing -- it is a type of malware, that is electronically shared over the security centers. that is not how it works? >> that is the first step we take the but to develop the threat indicators. we have taken steps in the past year automated methods that we can share that information at networks be to protect ourselves so we can take humid out of the loop. it requires significant investment and a lot of work to get there. >> how quickly is that moving? >> it will take us time to get

there. i do not have an answer when. >> from some of the definite organizations, is this one area to work on, the auditing, warning systems, but also here is the way to block the attack? >> yes. there are systems that exist today that the that automated blocking, and many institutions have those in place across multiple sectors. what fsisac is driving and working with the government began is coming up with a standard template for that information so it then feeds the system that exists today and will come down that path. we actually have a subcommittee that is addressing that taxonomy to move it forward. as errol mentioned, that will

require a capital investment, and this is one area where the government could assist us because we would like to cooperate together and move that forward faster. >> how is the technology disparity between of money- center institutions, financial trading platform, and my local community bank? how far behind is the local community bank? are there more flexible or exposed. what you see across the fed the official from? -- do you see across the financial realm? >> one point i would like to make is effectively all of the systems represented at the table, and the systems that have helped congress, they are under attack all of the time at some level.

in contrast, the situation just a few years ago, today that attacks are like weather, sometimes more rain and less rain, but generally speaking they are all under attack. to get to the point of your question, the larger institutions that have more sophisticated staff typically will be less susceptible to sophisticated attacks. i think the local community institutions are at a disadvantage when it comes to defending against extraordinary attacks. >> if there is infrastructure within the organizations for the data information fix to be quickly disseminated all of and down the food chain? >> there are two points. the dissemination peace are the

groups worker -- groups are working to facilitate. even the large, complicated institutions we had significant problems consuming of the volume and frequency it arrived. that will be a big challenge for small institutions because they have wondered for people. >> therefore the need for the automated platform. >> right. the firms that provide those institutions their financial products are good ways to do that. >> i am out of time. i appreciate your time. i yelled back. >> thank you. i want to thank the witnesses for attending. one of the other half i where is on the crimehaire enforcement at work. they do a terrific job on our behalf internationally on behalf

of treasury of the american people. they have done a good job, but they are working in a more limited environment then all of you. i want to try to understand. i know if the exchanges where you have more resources in some of the smaller institutions have to protect themselves, where are we in terms of where we need to be with some of the smaller institutions, local banks? we have split up certain benchmarks where we want there to be at least minimal coverage and protection for some of the smaller institutions, but is that enough? do we need to do more to required those smaller institutions to provide greater protection for their customers, and is there also adult the in

terms of what we require the exchanges to do, and where you think we need to be? perhaps you do even more to. i am sure you do more than even the government requires. i am trying to get a fix on where we are with the smaller and larger institutions, and where we need to be. >> thank you. speaking on behalf of attempts to address the smaller institutions, the fsi thinks this is important, and a lot of our efforts have been focused on education for customers. another step we took, because we think it is critical to deal with the fact that most of the small and medium-institutions use the same processors, so we

built on the authentication guidance that came out in 2005 and was updated last year, and actually in some of our recommendations got more prescriptive to the service providers of things than you need to provide in your products that your institutions can take advantage of. i would like to point out that the committee that i do not think additional regulation is the answer to this problem. i think the guidance that we have is very good, and it is applicable to all institutions and provides a method for dealing with the attacks in the cost-effective means for financial institutions of all sizes. >> what i am trying to get at is as i read the new york times this morning and has a front- page story about the president has exhilarated and amplified this cyber war that we are

having with iran. as mr. graham pointed out, this is ongoing. these are all the attacks. some times we have a shower or hurricane, but what i am concerned about that a state actor could bring a significant power of the economy down or financial-services sector down, and that would cause a great havoc at any time, but especially right now where we are trying to build up a recovery. are we anticipating that? are we meeting that challenge? >> yes. i did one of the basic -- i think one of the basic tenet is we recognize elements of the change, and in one of those

links a potential weakness. one of the major tenets there would be able to share incident information and share threat and vulnerability information with all the members of the can better protect themselves. >> the queue. -- thank you. >> one thing as think would move us towards the situation you would like to see in terms of prepared this is more cooperation from computer manufacturers and software vendors and producing products that are easier to secure. i say that as someone who used to work for a software manufacturer years ago. there were a lot of issues, but i think if we make the systems with fewer vulnerable place to begin with, that especially the smaller banks would be easier. in addition to information

sharing, which is paramount, we do not have time for a lengthy discussion, but the supply chain problem, the threat of supply chain of tax or really, i think, the most serious issue that faces us, and the one that would be most susceptible to hurt government. i think it is one where the u.s. government could make the biggest assistance. >> i yield back. thank you. >> thank you. thank you all for being here. i have a couple of questions. first of all, you did address this, but i have a constituent that called several years ago, and she had her own home

business, and she kept getting half into it. she kept trying to find the software, and it became very softly. she would put another sought for in, and then she would be hacked again. are some of the cost-effective measures for small businesses that do personal financial attract actions or on line through their smart phone? how can they minimize the risk of direct? specifically with customers that are using laptops or workstations to conduct small businesses, one of the recommendations that our industry is using is a data computer that you do not use for surfing the internet are checking e-mail. the price of hardware and software has come down significantly. this is a cheap insurance way for ensuring that you are saved

on line until the industry can get to the point where the software in the supply chain is more robust, but also i would like to commend companies like microsoft to have stepped up to the plate and are now producing infected. question, smartphones and other mobile devices are an emerging risk. everyone is listening to what is happening in other parts of the world and of making sure that we are analyzing and putting appropriate remediations in place. also, working on the education front to let people know of the risk of there. the guidance that we have, while it does not mention a mobile phones, is applicable to that technology. again, no regulation or guidance is needed there.

we have what will work today as the press change. >> are any of you familiar with chicago first? this was in 2003 by a chicago financial organization. it was to enhance the resilience of the community and infrastructure overall. including cyber security threats. and focusing on preparedness. >> we are very familiar with chicago first. there are a regional coalition. we partner with organizations like chicago, even though we're not based in chicago to participate in the exercise.

that committee is one that we trust. >> thank you. one more question. we worry about the government agencies protecting the proprietary information of the companies. if they voluntarily share security and the members of the european union and the u.s. are in discussion about this as it relates to the banks and other financials, including insurance. have any of you been involved in these discussions with the international regulatory and standards body? i guess that will have to see that the answer to that. how does a small, business entrepreneur -- where do they go to get the information? is there a place on line that they can find out?

>> any financial institutions have information on their website. to have held seminars for their customers. also through the account takeover tax force have put together a joint bulletin's would you have made available to our members. they can print goes off and give those to the customers. they approve all the recommendations for consumers and businesses for operating safely in the online space. that is a website that as a number of good recommendations. >> thank you. i yield back. >> thank you.

>> thank you, mr. chairman. i certainly appreciate the time. appreciate and agree that we want additional regulations. we are concerned about cyber threats and try to protect consumers as well. i guess my question is what role should the government take in combating the attacks. >> i think the key role that we are looking for is that information sharing on a timely basis. as unrestricted as the government can make it so that we can act on it to protect our customers. if the government has information about software and vulnerability, we would like to be made aware of that. >> what would be a timeline or timeframe that you think would be appropriate? >> as soon as they know about

it, sir. >> hundred you talk to your testimony before, each and every day you equated it to somebody ringing the doorbell. i am not so concerned about somebody ringing the doorbell. in its subassembly taking a crowbar to the back door. can you talk to me how, for instance, the nasdaq, you identify these stress that are coming in? what are you doing at the nasdaq to identify this? >> yes. i would be happy to, congressman. there are several ways to answer that. i think one of the important steps is to become aware of who the potential actors are and the most sophisticated out there. we're very much information -- very much interested in

information sharing. we try to equip ourselves with who is attacking various financial institutions. and what tools they're using. another approach is to try to build systems that can withstand technology to a crowbar. we put a great deal of effort into technology. except for very specific and tell your protected and regulated, specialized channels for the use of trading information. one of the things we do is to only allow a very narrow channel of communication into the

trading systems. that goes to several barriers. here is a point that may not be obvious. when you're talking about regulating information that flows through a network, there are two main ways you can do it. one is to constrain where the information comes from. we can call that the ip address to be technical. the other way is to restrain what kind of information comes through. we can talk about what network comes through. we use several layers of the fire walls to put the information that flows and and flows out to continually smaller and smaller filters. another point out like to make, in just a moment, is that you're trying to protect -- will use the analogy of try to protect our houses and the items we might have. it is not necessary to understand all the way somebody

might try to get into the house. in many cases, the defense we build our proof against many type of attacks. we tried to build as many defenses as we can. >> from each of your perspectives, i would be interested to find out. as we look at things we're looking at at the committee, what do you identify as the greatest threat you're trying to deal with right now? how can we in congress tried to help legislation -- try to draft legislation to highlight issues they're out there today. i'll start with you. >> i'll go back to one of my tenants. essentially going after the bad guys. really getting the united states to pressure foreign governments.

if these governments want to compete, if you want to participate in the global economy, the cost to purchase it is that they need to demonstrate that they have a favorable security legislation and demonstrate their actively prosecuting and punishing the people that are responsible for cyber crimes. the issue that we worry about today and the prevalence of the, customer computers and the mobile space we have mentioned as well today. >> my time has expired. i yield back. >> thank you. >> thank you, mr. chairman. i appreciate all the witnesses being here and sharing your expertise with us.

earlier you talked about education and how that can help. tell me, how much of this problem can be cured by good computer hygiene and good habits compared to a much more active defense? >> the internet ecosystem requires a lot of players to act to make the internet a safe place for financial commerce. certainly, a good computer hygiene is important. representative maloney mentioned the report. we have consumers who do not pass their computers. that is critical. we have to get the message out to people that that is an important step. and then the industry telecommunications and financial have a part to play as well. >> at what point will the industry determine that they

cannot allow consumers who do not run anti virus software and maybe now where software -- malware software to connect your institution and perform transactions? >> that particular step to interrogate a customer's computer to do that requires agents that an institution would have to play on a customer's computer so that some may choose to go down that road to make that decision. what i would say is to go back to the guidance that we have that says to look at the laird security and what you're doing to validate. is that the customer log in? do you think they are doing that

transaction? and this transaction is keeping with that customers pattern of behavior. there are things we can do without necessarily looking at the halls of this of that customer's computer. >> thank you. how many institutions, and i guess this is for the gentleman and maybe others who want to answer, how many companies use cyber insurance to help protect against liability? what percent of of folks out there and use that? >> i do not know the specific answer. i could probably get back to you. as you noted, it is in its second infancy. there was some talk about a decade or so. i -- we had some issues. i don't have an idea on the number 0 specifically. >> since it didn't really, and anybody's testimony, this inevitably the cyber 6 -- cyber to be an important part of creating new requirements on

folks without law that we would pass, but a much more dynamic model like it is done on workers' comp for many other issues up there? >> i would answer that in the sense that i think it could be helpful in other sectors i think it could be helpful in terms of the underwriting forcing the process. >> thank you. several you have mentioned the security protection in sharing act. does it allow the government to share information?

i notice not currently passed in its current form. are there changes you'd recommend? >> congressman, what i would say on that one is that certainly, as an industry, we support any improvements we could make to the public/private information sharing that is happening today. we could certainly use more of it. that is another one to help get access to even more information. i think we can also enhance information sharing within the private sector that are currently either perceived or real areas, from legal perspective, that are preventing some of the sharing today. we think that legislation could address this kind of issues as well.

we also would like to see. there's over one decade-worth of trust building. we would not like to place any additional hierarchy that could potentially introduce more into it. thank you. my time is expired. >> thank you. my subcommittee had a hearing a few months ago on a new entity created under the dodd frank bill. it was a story house for a loss of financial data. i was looking at some of our panelists today. a lot of you will probably be providing that information. what kinds of connectivity, and this question came up during our hearing, how secure is all this data that the ofr is going to be mining from the financial markets?

could you elaborate on your discussions and with you have concerns? >> i will focus my comments on the protection as opposed to the disclosures made by ofr. the protection, ofr is part of security. that is kind of the macro picture. we have to work out ways that protect the information while it is in transit. the methods being used a somewhat ad hoc. that is an area will need to work on. when it to work on the interests

of other parties and getting into that data. >> thank you. mr. graff? >> you put your finger on a problem, which is, how do we share that of permission securely? there are several methods to talk about. the technology is there. i think the more intense concern might be protecting a once it is in the federal networks. that is, frankly, a concern of ours. we want to work with the federal agencies to make sure we give them a sufficient, but no more than they need. we also like assurances about the way they protect those systems as well.

i think that is an important problem. is does encourage good security. i think there's a lot of room for improvement there, too. >> i am sorry. i'm not familiar with the particular regulation. >> ok. i want to go back then that to mr. clancy. there are multiple aspects of that. one is the transmission of data. and then two, once the data gets to ofr, how will it be protected? who will then have access to that data moving forward and how they use that data? and those are areas you have some concern. >> i think access to the data itself is one of the key questions, both in terms of the

progress of what is done with the data as well as i defend against it being misused. what we mentioned earlier is that as their taken over. someone can use the data. we expect a high level of resilience. >> thank you for those comments. we're talking about market participants. we talk about those who use it. i was going back to talking about small businesses and individuals. the computers at home or their laptops. there is a lot of discussion

going on right now about using cloud top systems to store your data. my question is is my data more secure in a remote location or is it more secure on my computer? >> a simple example, i have a neighbor who is a ceo of an intellectual based property company. his group is two people. anything he puts in the cloud of the will be better defended than he can do himself. our information in a public cloud would be very hard to defend a basic level of service. >> that is a great question, congressman. for the average person, their own system is likely to be safe enough to give them the security they want. it is a good practice, in general, to store the information with people who are

professionally trained to do it. also, they assume responsibility for the data. that is an important factor, i think. these providers have a much more robust infrastructure to protect your data that at home. >> yes. >> thank you, gentlemen. >> thank you. i have a couple of questions as to the distinctions, if any, that occur on these cyber attacks. we're talking today about just a banking online. is that correct? or are we talking about accessing the 401k information?

how broad does this get? >> cyber attacks are across our industry. they could be going against your checking account. they could be addressed to your 401k. we have companies a report this. it is not just that particular isolation. >> it is a 401k identified by a social security number. that is correct? >> blog providers used to do that, but they moved away from it. some more aggressively than others. the authentication is based on other data that is selected by the customer. >> which means it is not covered. >> the overall account is protected, but they're not using the social security as a user name to sign on. >> that is my question.

at one time you write a check, ticket to a bank, and not worry about covering in for a couple of days. of course, that is all done electronically now. what about the electronic transfers between banks? have these ever been hacked? that you know of? >> the platforms had not. the access to accounts that authorize the platforms, those front end systems have been targeted. what of social security that mandates, social security checks have to be deposited? i mean, now you have a federal mandate. is that cover? have there been instances where

the federal government has gone to transfer a social security recipients check into a checking accounts and the money has not showed up? before it got into the actual account? >> i am not aware of any instances of that, sir. >> the last year on my e-mail account, someone came in. attacked the account. put out this thing that i was trapped in britain and the people to send $1,500 and actually got another member of congress, a democrat, to make

sure i was ok. out of that was generous on his part. it took all my addresses. i had to reconstruct that. this is what we're talking about? >> we've been talking about things that cover that. that particular example, unfortunately, is a somewhat common scam. members might have known and then taken action to send money that it would've otherwise done. that is the technique they're using. behavior-based provocative messages. i guess the broader issue, really, is that he really does not think online.

i am serious. until you stopped by the office, i was present these were -- these commercial accounts were safe. you make a reference to accounts from members of congress and their campaign funds. how pervasive is this? should the american people take a look whether now or not it is worthwhile to bank online? >> that is the threat that might victims' group is trying to head off. that cyberspace will become such an unsafe neighborhood that

americans will just decide that they can not bank on line. that my fellow panelists have made the point that individuals and small businesses cannot possibly have the cyber security expertise to secure online banking on their and. we make community bankers in your district to become cyber security experts and spend their time studying at bulletin's and set about making loans to move our economy forward. the bad guys have one. even if they don't make off with the dime. your money is currently not safe at the bank, except at a small number of very large banks. they employ a multi-layer control processes. otherwise, whether you are randomly targeted like your yahoo account was.

the same people could get your commercial accounts if your banking from that pc. they could get your money. i do like the idea of buying a new pc to do online banking as a stimulus measure. however, as a $500 or $600 tax just for the privilege of using on-line banking, i am opposed. >> thank you. >> i would send you money if i knew you were trapped in europe. >> i'm not back in britain. people click on a and somebody is selling the product out of their house. i guess the virus went through

again. i got back 50 or 20 people saying you have been hacked into. >> your first mistake. do not have of friends. >> that is easy because i'm a politician. >> [laughter] >> one i have a personal interest in, let's see if i can phrase it the proper way. we often, what we will do is shut down the server. but there is legacy software out there in the world sitting on computers. my understanding is that we will have creative souls who will come in and set up a new high tech.

how much of that is mechanic? because the residency on computers around the world are also correct. >> i think that is a very large threat. if you would allow me to defer to mr. weiss on this question, because he is been very active. >> and my phrasing in the proper mechanics? >> that is absolutely fine. let me just elaborate. we thought it was a very proactive thing to do, to have customers protect themselves. a partnership. to laughter three of the very dangerous. that is actually at the server level. this is an action to go after

the command and control sector. >> what is residency on individual computers and systems? >> right. what we normally find is that we've talked a lot about this e-mail is that people are clicking on. that is probably not the only thing you have been affected -- infected with. now that we have the command and control infrastructure seized from criminals, those computers are now phoning home to the good guys. instead of being under control of the bad guys, -- >> what you get is a redirect. >> exactly. the debt forensic evidence. we will at one point be able to claim these machines. >> interesting. this one the chairman wanted me to ask.

quickly. tell me. if you're going to do one thing, tell you it would be in security. >> we are blessed that it is easy to stop and the solutions are in place. so, just move the responsibility as she spoke about to the processors. my number one is we have to stop malware. if you look all of these attacks on the pentagon, small businesses, everybody, is the fact that computers will run software that other people wrote

who are not your friend. we have not figured out the anti virus products stopped working over five years ago. we have not gotten them working again. we cannot detect the latest model now where -- malware. >> we have to keep the ball rolling on the inner -- on the information-sharing. in june 2011, it became the third to become a regular presence. from that point to afford between the sectors, between the government, we made great strides to improve in the relationships between the financial-services sector. >> threat sharing. >> yes. >> i would take it one step

further and say threat analysis. a lot of data flowing back and forth. or it could come from other sectors. but taking that data to know when you have the incident that really matters. or more importantly, we see the trend that is coming out and '82 act sooner than later. >> i take a slightly different approach. i am very concerned about the supply chain. the possibility that computer manufacturers are others might be able to introduce pieces of hardware/software into computer routers. even network cables. >> the advantage of physical barriers.

>> yes. it is a problem both in hardware and software. the initial problem is, in fact, hardware coming out of, it appears to be a router with specialized chips. >> forgive me for going so over time. >> be simple. take the program i mentioned. make sure it continues. >> engage the telecommunications industry in this discussion to help. >> can you give me a little more definition there? >> yes, sir. because of the fact that they pass this traffic between us, our customers and thus, between other sectors, are in a situation in our infrastructure where they see this traffic, and they're given the authority to dump it, that would get rid of a lot of problems.

>> thank you. the gentleman from new york. >> thank you very much. last year the fcc can now with a guidance that financial firms had to disclose the cost of material cyber attacks and include a description relevant in insurance coverage to shareholders. how common is the use of cyber insurance by financial institutions now? do they have this type of insurance now? can someone answer? how common is it? >> it is not very common. that is the challenge. >> what factors are considered in determining whether or not an institution has a cyber risk?

>> the same factors that are used in all the other guidelines that we have are used to evaluate cyber risk and going through that application process. >> there have been some reports about pump and dump. what steps have the private sector taken, or federal regulators, to prevent so- ams are they t t move the market by moving the price of security in the camps of they have taken over? how common is this practice? i have read about in the papers. is it common? a very uncommon? >> i did not have a sense of frequency. it certainly happens enough that there is a group together out of pittsburgh.

it is a policy or information for those crimes are shared. and then potentially referencing back. >> our like to ask you about your great bank. it was the subject of a high- profile cyber attack in 2011. can you tell us what changes citi has made since then? what is difference now? >> it impacted our credit card business only. since then, with have many lessons learned. lots of millions of dollars and people's times to improve the monitoring system that we have

in place today to make sure that kind of breach does not happen again. >> our like to ask anyone familiar with their practices if they support federal pre- emption of state laws. what specific differences in state law posed challenges and can you explain why you favor pre-emption? >> outtake the first crack at that one. one of the major issues for us is being able to reconcile more than 50 different state laws and regulations that we have to deal with when it comes to notifications. where to figure out which notifications we have to provide, when, how much. as the standard we can rely on. we think and the confusion of

the customers are getting today. >> you made clear that you believe account takeovers continue to be a challenge at financial institutions. to what extent could regulatory changes address concerns or what legislation our actions are needed to address the problems that you perceive are there? >> of course, if you read my bio, you know i'm not in favor of regulation. in this particular case, to stop this crime and that we close and, we reduce the amount of net regulations not make the sport community bankers study it. as she said, put the

responsibility of those risks on the processor. . in one case, the bank had the fraud controls in place, was paying for them but was unaware of it. they're getting brands-alerts, that this did not know to look at them. there were not responsible for transfers. they're getting these alerts. >> my time is expired. thank you. >> thank you. >> thank you, mr. chairman. following up on the syllabus,

there is a survey that is described in your written tariffs -- in your written testimony that there is a drop in commercial account takeovers between 2009 and 2010. what do you attribute to this large reduction in fraud and? >> the answer may surprise you. when we told our members of the most recent survey, they said customer education was the most pacific driver to that. >> -- the most specific the driver to that. >> that was specific to corporate account takeover. >> ok. thank you. in your testimony and a list of

various communities and sharing groups that you have here, it seems like there might be too many of these groups where each are slightly different, so that we may have a lot of information flowing back and forth. potentially the correct information may never get to the right place. should we be streamlining information sharing, even as we seek to improve this? >> i think the answer is probably two-level. i think we do work very closely together across a number of the organizations and associations that we have. we try to make sure that each of us is focusing on key areas and we're not wasting resources in terms of time and effort. specifically, information sharing. i think that within our industry we are doing a good job at sharing through all the

information. i think when we start to think about sharing between sectors and between the public and private sector and having some of the standards that mr. weiss mentioned earlier and how the data gets formatted, how we can look at it collectively will be important because i do think there is a risk that so much data will come from so many different sources that we will miss the answer in the analysis and will not be able to do it well. >> thank you. we have been talking so much. people have been hacking in or attacking. mr. clancy, you said something about enforcement. maybe this is beyond the scope, but how many of these people

get caught? or do they? what happens? what is the penalty, and what happens? >> i do not have a specific answer on how many people were caught. the attacks happen in a time scale of minutes and hours. the law enforcement activity happens over months and years. the challenge is the difference between those two points and we respond to them. on the minutes, seconds, and hours from, you have to focus on mitigation. that is why we focus so much on information sharing. >> would anybody else like to -- ok. i yield back. >> thank you, mr. chairman. my question is for mr. weiss.

consumers get a third party liability protection. they cannot lose more than $50 of electronic transfers. some level of talked about expanding that to business customers to help protect them from these account takeovers. that would shift the liability from financial institutions and potentially, i suppose, make the small businesses less interested in some of their protection, although i guess it does require them to immediately notify the system. is that a good idea or a bad idea? >> currently, commercial and small-business customers are covered in every state. we feel that has stood the test of time. >> what is the coverage amount? >> that the standards need to be commercially reasonable.

>> mr. weiss, the you want to? >> really, nothing else to add. >> if i may, what commercially reasonable means, as a matter of law, is the subject of 12 lawsuits. two of them were settled for 100 cents on the dollar just as soon as the banks saw with the judge had to say about their motion for preliminary finding for the defendant. one was actually won, so far, by the bank. one was one by the victime. the consensus of the big security conference was that given the new 2011 guidance,

going forward, there will be found currently to mean that the banks are liable. our victims' group has deep concerns about making small bankers liable for the risks that they cannot understand and cannot really manage. we would like to see those risks and responsibilities moved because it is possible that small banks will have to hold additional capital against the possibility that these large-demand accounts might have to do a refund because the transfers were fraudulent, not going back and 90 days. this is too much for small businesses, too much for small banks.

>> thank you very much. i yield back. >> this will be our last questioner to the panel. i do appreciate your patience. this is an interesting area with lots of layers. >> thank you. i bought a new computer a couple of years ago. the store recommended x co. software anti virus. for different amounts got different coverage. does this stuff work? >> it works to a point. the challenge has been that the innovators innovate. they make sure their attack code is revealing.

it is a cat-and-mouse game. does it to be 0-weeks later? -- does it two weeks later? >> it is worthwhile to advise protection. >> but it is worthwhile to buy some type of protection? >> you are better off with it than without it, but it is not perfect. >> when my count got hacked into last year and my contact lists were stolen, i called a representative of this company. i don't want to give the name of this company because they are a fairly responsible company and it would be unfair to name them publicly. but the lady said because the information on that e-mail

account was not stored in my pc, but somewhere in the cloud or wherever else it was, this anti espy where was unable to protect it. -- anti-spy ware was unable to detect it. >> the user name and id used to get your e-mail was compromised and the bad guy log in from some other system to pretend that they were used to send out these e-mail's or use a system to do that on their behalf as opposed to actually using their own personal laptop. because your credential was stolen, it appeared as you signing in with your password, so it must have been you.

the client tool did not come into play because it was external and would have potentially prevented that if it actually occurred when you're using your computer and not when you were traveling more on another machine. >> how did your id and password get compromise? the typical way is they have malware on your pc and they still your ibm password and transmitted it to the bad guy. there are other attack mode and you can recover your password by knowing some challenge questions that they can research about you. there are other possibilities, but it is almost always malware. >> it is it an option to download what is in the cloud

right now directly onto your pc and would that make it more secure? the lady said it would actually open everything else up on the pc to that attack. >> it would make it less secure because the testimony here among the experts is you cannot secure your home pc. the pentagon cannot secure its desktop pc. they're just to places it could be attacked. it could be physically stolen in a robbery and the data would be on your hard disk. >> i guess it's still goes on, but the computers would generate a list of seven numbers and then actually come up with a combination that it will rain -- it will ring. do people do this, look at

someone's name and then try to figure out different combinations of that? how individual is this? in the hacking that takes place. is it on a broad base so everybody gets hacked at one time. that's not correct because the crystal lake school district and it was just their district. >> hi think both. there are, the attacks that are broadly founded, based on people just trolling the internet and then there are targeted attacks that are very convincing and very personalized to that individual and you have sophisticated criminals doing those attacks and criminals doing the more widespread things. you have both. >> my account, you really should

not have your name on that -- would that be correct? >> if you look at who lost money, it is random. your school district was randomly unlucky. every time banks signed someone up for on-line banking, they get a reverse lottery ticket. if the number is selected by the criminals, they lose $300,000 like crystal lake does. studies of the victimization pattern, it doesn't matter. you are just randomly unlucky to end up with it on your pc and get your money stolen. criminals try everything. they try every attack every

which way so you cannot defend yourself. >> thank you. and thank you to the panel. this is interesting and i have a feeling we will be spending a lot of time on this in the years to come. some members may have additional questions for this panel which they may wish to submit in writing. without objections -- always worried someone will come in and object. the record will be open for 30 days to place your responses in the record. there were two or three members that technical questions that will come to you. thank you for your participation. this hearing is closed. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]

>> it join us later today for a discussion on the european debt crisis. speakers will include the ceo of

deutsche bank. you can watch at 5:00 eastern on c-span. later, more live programming with a campaign fund-raiser with president obama and former president bill clinton. that at 8:25 eastern. tomorrow, voters in wisconsin will cast their ballots in the governor's recall collection. scott walker is being challenged by democratic mayor, tom barrett. we will replay the final debate one hour before washington journal starts here on c-span. don't forget to make c-span york clearing house for all things related to this election. read endorsements and analysis and follow the campaign cash. >> the ftc is primarily an

enforcement agency. it has settlements with a lot of companies about some of the promises they made to consumers. i think self regulation is at tool that can be much more responsive to changes in the marketplace in a quicker way than regulation. >> tonight, i look at the federal trade commission enforcement role in dealing with privacy on the internet. that's 8:00 eastern on c-span2. >> the president has a hard time selling an argument of economic optimism when at the same time people are not feeling it. >> the american people know and the way they approach this election is they understand we did not get into this crisis overnight and we're not going to get out of it overnight.

>> the question is what do the people into florida, virginia, what they think about their lives -- is it getting better or is it getting worse? who is responsible? that is not as quantifiable. >> this last week, the national journal focused on the 2012 presidential election. watch it the discussion online at the c-span video library. >> at his monthly briefing, the need as secretary general said no agreement has been made with pakistan but talks are in progress. he highlighted some of the key points from the nato summit in chicago which included the relationship with russia following the recent election of vladimir putin and it was trying troops from afghanistan. this is just over half an hour.

>> good afternoon. at the chicago native summit two weeks ago, we set three goals -- to shape the next stages of our engagement in afghanistan, to ensure nato invests smartly in future capabilities, even in times of austerity, and it to strengthen our relationship with our partners. we achieved those goals. now, we are taking the next step. in afghanistan, we said at a clear path to 2014 and beyond. we set out a clear signal to the afghan people and the region that we will stay committed. afghan army and police are taking the lead of security for

75% of the population. in the coming weeks, more than 100 districts and cities in afghanistan will begin the transition to afghan responsibility. that is a challenge, but the afghan forces are ready. already, more than one-third of a million afghan shoal -- afghan soldiers are trained and ready to keep their country secure. 18 army battalions and 65 police units have been certified as capable of operating independently with advisers. at the same time, more and more and surgeons are choosing to come back into society. right now, around 04 thousand

400 former fighters have entered reintegration programs, an increase of 40% since december. [speaking french] >> we will continue to provide afghan forces with the training they need in order to make sure progress is irreversible. that is why we have decided that nato and the afghan government would work together in establishing a new mission after the end of transition. we are starting the process of planning for a new mission for afghanistan. this will not be a combat mission. in this new mission, the aim

will be to train, advise, and assist the afghan security forces. we also made a clear political commitment. we will pay our share of future funding for these forces. you heard the afghan president's restate that commitment of the afghan authorities to live up to their responsibilities. >> we also reached agreement on reverse trends of from afghanistan with three central asian partners -- these agreements will give us a range

of new options. i sang all three partners for their support and to nato will continue to actively engage with afghanistan's neighbors to build wider support for the country's stability. we are also making progress on implementing decisions on the other two key areas. in chicago, we signed the contract to have an surveillance capability, unarmed crowns, that will allow commanders to see what's happening over the horizon at anytime and in any weather. to note that denmark has decided to join the acquisition phase of the

project. this is a valuable signal of solidarity and our commitment to keeping our lines strong and capable. we also declared an intermountain defense capability that has now been former lot -- formally added to our headquarters in germany. our preparations are completed. this is a first but significant step toward our long-term goal of providing full coverage and protection for all european population, territory and forces. i know russia's concerns of these issues, so let me be quite clear. those concerns are groundless. nato missile defense is not directed against russia and will

not undermine their strategic deterrent. nato wants to build a strategic partnership with russia. last week marks to important anniversaries in our relationship. on the 27th of may, it was the 15th anniversary of the signature of the nato russia founding act, the document which sets out the framework of our relationship. on the 28th of may, we marked the 10th anniversary of the creation of the nato-russia council. the forum where we meet as equals to discuss all topics. we have come a long way since those two agreements. we are building practical

cooperation in many ways we have complementary interests -- afghanistan, counter-terrorism and the fight for privacy to name just three. our goal is to take that cooperation to the next level and make nato and russia true strategic partners. but to do that, we need to improve the level of trust, transparency, and predictability in our relationship. we welcome our cooperation with russia and we want to strike that. but we are concerned cut by some recent russian statements, including military deployments close to nato borders. we intend to raise this with russia. we have pledged to discuss the areas where we did agree.

that is what we will do. finally, at chicago, there was a strong message where partnerships are essential. our meetings were a recognition of that reality. and an opportunity to discuss with our partners how we work together and how we can improve our cooperation. we have built up a powerful momentum. now it is vital to keep going. that is why later today, i will meet the prime minister of new zealand and next week, i will visit australia. both countries are making a real difference to our mission in afghanistan.

i particularly welcome australia's recent announcement that it would take the main mentoring role in all of them. this demonstrates that countries such as australia and new zealand may be far away geographically, but they are close to us in terms of value and commitments. together, we will discuss how we can come even closer together. with that, i am ready to take your questions. >> we will start in the first row here.

>> [inaudible] >> it this invasion of pakistan was useless. can you comment on that? >> first of all, i appreciate the president's attended our meeting in chicago. i invited him to participate in the meeting because we want a positive dialogue with pakistan. it was definitely not useless. on the contrary, the president confirmed it is his clear intention and the intention of pakistan to engage positively in finding solutions to the

conflict in afghanistan. as you well know, we still have an unsolved problem with regard to the route through pakistan. i still hope to see a solution to that problem in the very near future. >> may be a follow-up to the question from before -- how far are the talks now? is there any progress? have you just agreed that you can use the transit routes to bring troops home or is it just a matter of money? what is the question you have to deal with here? in the chicago and afghanistan,

is the figure more clear how many soldiers he will take back from afghanistan? is it 1000 or 2000 or is it still to be figured out? >> on pakistan, i'm not going to comment on negotiations with pakistan. i will just reiterate that i still hope a solution can be found in the future. at the same time, let me stress that we concluded a number of very important agreements at the chicago summit and that will contribute in a positive way to our operation in afghanistan as

we gradually wind down our operation to the end of 2014. i would leave it to the french authorities to agree on their figures. i have taken note of the very clear statements from president hollande also expressed in clear terms that france will stay committed to the operation and continue to contribute throughout the transition.

>> there were three contracts -- designate no pay for the reverse trends it? the second was, can you give me the smart defense initiative in regard to the fact that some countries like germany always has to give a green light when they would like to send troops somewhere or if they would like to participate in a mission. >> first, i do not comment on details in the arrangements. we concluded the agreement from satisfaction -- with regard to

that next steps as far as the smart defense is concerned, we decided at the chicago summit to have some sort of work and we will continue to develop national projects. secondly, we would have to find solutions to a number of issues. what is the topic you mentioned and how we can presume the availability of multinational capabilities. but based on what i heard, at the chicago summit, i am quite optimistic that it's a strong political commitment to actually

use and deploy multinational capabilities when it is needed. that goes without saying. it is at the end of the day national decision whether a country wants to participate in a military operation and deploy military assets and how. i think all nations realize if in the future we rely increasingly on multinational capabilities, we have to enhance the resumption that the capabilities will be available. if we don't and hands that presumption, companies will be reluctant to invest their resources in multinational

capabilities. all nations are very much aware of that aspect. all 28 allies endorsed the concept of smart defense knowing that this is a challenge. ised on that, i'm sure there a strong commitment to deploy a multinational assets when needed. >> could you elaborate on what should have been done on the following mission to afghanistan and what is the time frame for coming up with the definitive [unintelligible] >> we have started preparations already. it is a work in progress. i would be reluctant to present

any deadline. the deadline is by the end of 2013 but for planning reasons, we need clarification some time before that. having said that, it is also a fact that the exact profiles will very much depend on the actual security situation on the ground as we approach the end of 2014. this is why i would be reluctant to present to you any exact deadline. but i can assure you we have started preparations already and

the core of that mission will be a trading mission with the aim -- a training mission, with the aim to train and advise afghan security forces. >> [speaking french] >> regarding the intent to withdraw some forces from afghanistan on the part of allied nations -- the number is increasing. we have five or six nations who have expressed interest in withdrawing troops. some say that this is down to an issue of the troops but some have raised the issue of the data budget. apparently there is a financial crisis within nato. how can you explain this? several months after the fall of

the regime of muammar gaddafi, we are right -- we are waiting for the final operational report from nato. how is that coming along? >> there is no financial crisis within nato. quite obviously, there's an economic challenge. i feel we have put responses to that. the solution is our smart defense initiative. we are going to promote cooperation on a multilateral basis and as you will be aware, we have adopted a certain number

of multinational concrete projects and this is a very compelling response this is the path to be followed in order to avoid that the financial crisis will become a security crisis so there is the of financial crisis within nato copper. we are indeed facing an economic challenge and we have found a solution to the challenge. >> would you remind me of the question on libya? >> several months after the fall of the regime there, we have not received a report of the

operations in libya. why not? >> we have reported to that united nations in keeping with the established rules. >> a question about the funding -- the purchase was achieved with some difficulty. a group of 18 nations are coming out of the common funding but this model is not a rule. it is an exception so far. my question is, for the smart defense, are you going to pursue these multinational models? don't need to reform the way

funding is used? >> definitely. that is one of the follow-up works we adopted in chicago. we will look closer in to how our funding mechanisms work to make sure they fit the purpose, that they work efficiently, that we make the most efficient use of resources and that they are completely transparent. in order to promote multinational projects, we need to reform our funding mechanisms so that all allies know that they are efficient

ways of doing it. >> that does mean a loosening of the rules? >> you might well argue it is strengthening rules to make sure things work transparently and efficiently. >> last week, they started operations to remove the barricades. the statement coming from the serbian officials say this is

endangering peace. [unintelligible] are they going to continue removing barricades? >> 3 points -- our troops acted in self-defense. second, i would commend the way in which our soldiers handled the situation. third, i can assure you they will continue to implement the united nations mandate to maintain a secure environment and ensure the freedom of

movement and that they conduct their operations and a status neutral and impartial way. i strongly regret the show of violence during recent days. i urge all parties to do their utmost to stop violence and insure a peaceful solution to the problems in their region but i can assure you they will continue to implement fully the united nations mandate. >> a newly elected serbian president is sending dubious signals to the region. denying a genocide -- he is a

person who considered nato as a criminal organization. from the perspective of having a mission in kosovo, should she be more confident in the relief in belgrade? >> i think it is for the international tribunal in the hague to make the illegal judgments on what they have done already. we monitor the situation. for my part, i would not rely on media reports of a statement from the newly elected serbian president. i hope we can continue the

positive dialogue we have had with serbia. my vision as regard to the balkans is very clear. i would like to see all countries integrated into the european union and nato and i expect to see improvements in serbia and nato. >> i have two questions concerning the reverse transit. the first is no agreement with neighboring countries -- what -- if you are in agreement first and are there some limitations or restrictions with the

nonlethal equipment? >> in general, let me say that we do not commend on these arrangements. with russia, we have a reverse transit arrangements already. the fact that we have concluded an arrangement, three concrete arrangements at the chicago summit will make use of the arrangement even more effective.

>> my question is concerning nuclear weapons. to develop concepts [unintelligible] is there any concrete agenda? the negotiations between the u.s. and russia. >> there is no hidden agenda. you have seen everything clearly expressed in deterrence review which was published. it was published in the chicago summit and the principles are very clear. we have reiterated what nato

countries signed in 1970 the grand vision is a world without nuclear weapons. but we state that nato will remain a nuclear alliance. we indicated in the defense posture review that we would very much like to see a reduction in the tactical nuclear weapons. but we have added in that case that we have to ensure that such reductions take place in a balanced way and the fact is nato nuclear powers have reduced their stockpiles significantly since the end of the cold war.

we still have quite a number of russian nuclear weapons, so that disparity has to be taken into account. in case we could reach agreement on the balanced reduction in the number of nuclear weapons, we are in favor of that and have indicated the deterrence posture review. you can read everything. there is no hidden agenda. >> time for one last question. >> do you think vladimir putin does not plan or want to meet you right now? >> we have not discussed the

issues. as you may recall, i called him and congratulated him on his election a few minutes after the presidential election and we agreed to meet in the not too distant future. at the end of the day, it's a calendar question and no date has been fixed yet. >> thank you. >> the ftc is primarily an enforcement agency and has brought many good cases in the consumer privacy area. the settlements with a lot of companies about some of the

promises they made to consumers -- i think self regulation is at tool that can be much more responsive to changes in the marketplace quicker than a regulation or testing laws can be. >> tonight, a look at the federal trade commission and privacy on the internet. that's at 8:00 eastern on c- span2. >> coming up in about 50 minutes, a discussion on european that hosted by the atlantic council. speakers will include the ceo of deutsche bank. that's live in about 15 minutes at 5:00 eastern here on c-span. until then, a discussion on chinese investment in the u.s. from this morning's "washington journal."

host: we're going to be talking about foreign direct investment. how is that different from what we hear about china buying u.s. bonds and debt? guest: thank you for having me on the show. we've talked about to different kinds of international investment flows. the one we're going to talk about today's direct investment which means either building from scratch, or a merger and acquisition or a foreign company becomes the owner of a growing business at or concern in another country. separate from that is portfolio flows which is either government investment or asset management from one country buying securities, stocks and bonds and treasury debts traded in other countries. portfolio flows are gargantuan

but they don't require much skill. you just need to chat -- to tell the foreign managers to pick up the phone and buy treasurys. operating the plant on the ground in illinois or california is a very different thing, as we will probably discuss a little bit. it indicates china is getting to a new stage in its globalization. host: you have a new report out called "is america and open- door?" take us through what you say this is a turning point. guest: just in terms of the numbers, we should start by establishing that. until two or three years ago, there's almost no chinese direct investment in the united states. no matter how powerful we thought china was or how strong its firms seem to be, they were

pretty much incapable of operating in an economy like the united states. they were doing big resources deals in iron ore and things like that mostly in developing countries where those activities take place. but they were not yet able to manage the basics tax filing in a place like the u.s. or europe for that matter. since 2008 or 2009, we see a definite in flexion in that trend. whereas we just saw a few deals a year and well under $1 billion a year, it's much more typical to see $6 million a year happening in that u.s. the same kind of incredible take off, we are now starting to see,

but there is a long way to go in terms of investing. from the history of inflections in china, we know how this movie unfolds. host: if you would like to talk to daniel rosen, give us a call. i saw that 2009 was the first time china cracked the top 10 in terms of foreign direct investment. have they continue to stay in the top 10? guest: yes and there are two reasons for that. china is getting there and after 30 years of making socks and underwear, they are merging into a set of countries that to

global operations and services and manufacturing. the rest of the world hit the skids. outbound direct investment flows from a big heavy hitters definitely took a breather for a while as we dealt with our own economic distress. we had an uptick in china's readiness and a downshifting of foreign activities. >> your report shows the blue line on top, the united states foreign direct investment. the chinese are the red line down here which has just in the past few years ticked up. what does this relate to as far as jobs in the united states that chinese companies are directly responsible for?

>> that's a good start to use. there is quite a notable upward change in pattern. given how long -- how large china is at how much momentum that has, we know where the line is going to go. on the other hand, it is clear just how far ahead the advanced economies are relative to where china is in terms of these global activities. all of china's economic strength relies on the home court advantage. china's model has not traveled very well to date. it is not on the same terms as they inch away at home. what are the impacts in terms of the american tax base and jobs? first, let's bear in mind that it's very early days. 350 deals are so that we have track in our china investment

monarch -- china investment monitor. this is done in partnership with the peterson institute. it has only been two or three years. you don't create the bulk of your employment in two or three years. the bulk of the numbers say there's only about 5000 american jobs associated with chinese direct investment. when we do the count, we can easily find 15,000 to 20,000 today. keep in mind the japanese firms operating in america employ about 700,000 americans. we have some big potential members to come down the road and we are at a very early part in the story. >> we have a china investment monitor up here and it's also available on your web site. folks can go and see the investment by state. there is more concern about

chinese investment in the united states and japanese investment in the united states. can you talk about the controversy surrounding folks who are afraid of chinese buying up u.s. businesses and other companies? >> historical context is very useful here. in the 1980's, you could have said the exact same sentence except switched japan with europe. if we went back to pre-world war two, you would have said more about german investment in the chemical sector. then go back to 1776 zandi find great concern about british investment in american steel mills. this is a perennial american concern that generation after generation we have settled on

the side of openness and decided what ever the concerns are about having foreign firms bring their cash, their money to invest in the u.s., we can probably manage those concerns and get the best out of this without being in a disadvantageous position should we have a bad relationship down the road. host: your report argues for more openness, but shouldn't we be a suspicious of a country where the state owns half of all the industrial assets in china? aboutn't we be suspicious their motives and where they are picking and choosing to invest? guest: you want your staff in washington to have a horrible imagination that they would want to talk about what they do for a living. let's be maximally suspicious. but it doesn't require as to

exclude these chinese firms from bringing money over to put to work in the american economy. we can manage the security concerns with the existing regime set has been developed over 100 years to manage these issues. interesting that about three- quarters of the number of chinese firms that have invested in the u.s. are not government- related firms. there are privately controlled, they have more than 80% non- governmental control over those interests. there's quite a bit more diversity in terms of what firms we're dealing with that most people probably appreciate. take some calls on this subject. first is called the republican line. caller: i'm a few questions for our guest. first, do you think it would be

better if we had free trade and would get some goods and bring it back wholesale? second question is do you think just because they allow free trade in china that might be the reason they allow some the investments in the united states? host: thank you. guest: one of the things that explains china's amazing development over the past three decades is that compared to most development models used in say let's america, china really did commit seriously to free trade. in 2000 or 2001, the officially got in and they all the doors open. as the caller suggests, a lot of investments we see happening now would not be happening of

china hadn't achieved tremendous restructuring of its economy and trade over the past decades. as it turns out, once you get past making socks and underwear and start making branded goods, the difference between hitting stockings and victoria's secret, requires you not just to manufacture competitively, but to maintain a presence in other people's markets so that you have your own customer relationship and experience with people buying products rather than depending on someone else. it is precisely that trade competence that many chinese firms have developed that leads to their firms wanting to have their own marquee shops on madison avenue, where i am sitting today. host: one of the big stories in terms of chinese investments is the story of the amc movie theaters.

this is from "the christian science monitor." -- can you talk a little bit about that specific purchase? guest: it is a fascinating reminder of the signature japanese deals of the '80s and '90s. with the production studios for movie-making and people had the same concerns and misgivings about what it might mean for american culture in the future. what it means is chinese firms

have a lot of cast presently but are running out of easy ways to put it at work back in their home economy and we will increasingly see them going abroad, looking for premier assets connected to the american consumer, which for all our problems here, we have more consumption and spending activity by a considerable margin and china will have for another decade or more. there are assets here that will be of strong interest to chinese firms. they are progressive company, known to be on the lookout for profitable commercial opportunities. it is a good deal to be in the headlines right now because it demonstrates most chinese interest in america is going to have no national security significance.